rk Chapter 15 On June 30, 2018, Georgia-Atilantic, Inc, Atlantic to make semiann
ID: 2514082 • Letter: R
Question
rk Chapter 15 On June 30, 2018, Georgia-Atilantic, Inc, Atlantic to make semiannual lease payments of $414,921 over a 5-year lease term, pavable each unr Georgia- leased warehouse equipment from Builders, Inc. The lease agreement calls for first payment at June 30, 2018, Georgia-Atlantic's payment amounts. Builders manufactured the equipment and PVAD of $1) (Use appropriate factor(s) from the tables provided.) incremental borrowing rate is 80%, the same rate Builders used to calculate lease at a cost of $3.0 million. (FV of $1, PV of $1, FVA of $1, PVA of $t, FVAD of $1 Required Determine the price at which Builders is "selling the equipment (present value of the lease payments) at June 30, 2018 2. What amounts related to the lease would Builders report in its balance sheet at December 31, 2018 (ignore taxes)? 3. What amounts related to the lease would Builders report in its income statement for the year ended December 31, 2018 (gnore taxes)? es (For all requirements, enter your answers in whole dollars and not in millions. Round your final answer to nearest whole dollar.) n the K Prev2 of 4Next > 4%/2018Explanation / Answer
(1) Present value of lease payment;
= Semi-annual lease payment*(PV of annuity due. n=10, i= 4%)
= $414,921*8.4353 = $3,500,000 (rounded)
(2) Receivable at December 31, 2018
Note: The Receivable replaces the $3,000,000 Equipment on the balance sheet.
(3) Interest effect at the year end Dec 31, 2018
Income effect= (3500000-3000000)+123,403
= $623,403
Working notes:
Interest Revenue = [4%*(3500000-414921)]
= $123,403
Lease Receivable (Dec 31,2018) = $414,921-$123,403
= $291,518
Particulars Amount ($) Initial Balance June 30, 2018 3,500,000 Less: June 30, 2018 reduction (414,921) Less: Dec 31, 2018 reduction(see notes) (291,518) Dec 31, 2018 Net Receivable 2,793,561Related Questions
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