On June 30, 2018, Georgia-Atlantic, Inc., leased a warehouse facility from IC Le

Question

On June 30, 2018, Georgia-Atlantic, Inc., leased a warehouse facility from IC Leasing Corporation. The lease agreement calls for Georgia-Atlantic to make semlannual lease payments of $486,269 over a four-year lease term, payable each June 30 and December 31, with the first payment at June 30, 2018, Georgia-Atlantic's incremental borrowing rate is 10%, the same rate IC uses to calculate lease payment amounts. Depreciation is recorded on a straight-line basis at the end of each fiscal year. The fair value of the warehouse Is $3.3. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use approprlate factor(s) from the tables provided.) 714 points Required: 1. Determine the present value of the lease payments at June 30, 2018 that Georgia-Atlantic uses to record the right-of-use asset and eBook lease liability 2. What pretax amounts related to the lease would Georgia-Atlantic report In its balance sheet at December 31, 2018? 3. What pretax amounts related to the lease would Georgla-Atlantic report in its Income statement for the year ended December 31, 2018? Hint (For all requlrements, enter your answers In whole dollars and not In mllllons. Round your final answer to nearest whole dollar.) Print 1. Present value References 2. Pretax amount for liability Pretax amount for right-of-use asset Pretax amount for interest expense Pretax amount for amortization expense 3.

Explanation / Answer

1 Present value of lease payment;

3.

Lease payment $486269 PVIFA (5%,8) 6.4632 Present value $3,142853 2. Initial Balance $3,3,00,000 Acc depreciation at Dec 31 2018    -412500 (3300000/4)*1/2 31st December 2018 $2,887500 Initial Balance $3,300000 June 30 2018 ($486269) Dec 31 2018 reduction -345583 486269-(5%*(3300000-486269)) December 31, 2018 net liability $2,468148

3.

Expenses June 30 2018 Interest expenses 0 Dec 31 2018 Interest expenses 140686 (5%*(3300000-486269)) Depreciation exp, 31 Dec 2018 412500 Total expense 553186

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