On June 30, 2018, Georgla-Atlantic, Inc, leased a warehouse facility from IC Lea

Question

On June 30, 2018, Georgla-Atlantic, Inc, leased a warehouse facility from IC Leasing Corporation. The lo Georgia-Atlantic to make semiannual 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 lease payment amounts. Depreciation is recorded on a straight-ine basis at the end of each fiscal year. The fair value of the 10 points warehouse is $3.3. (FV of S1, PV of $1, FVA of S1. PVA of S1, EVAD of $1 and PVAD of $D (Use appropriate factor(s) from the tables provided.) eBook Hint Priet Required: 1. Determine the present value of the lease payments at June 30, 2018 that Georgia-Atiantic uses to recoro the right-of-use asset and 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 Georgia-Atlantic report in its income statement for the year ended December 31, References2018? (For all requirements, enter your answers in whole dollars and not in millions. Round your final answer to nearest whole dollar.) Present value 2 Pretax amount for Pretax amount for right-of-use asset 3. Pretax amount for interest expense Pretax amount for amortization expense

Explanation / Answer

1. Present value of asset/lease liability = FV or PV of lease payments whichever is lower:

Present value of lease payments at June 30,2018 = Quaterly payments * PVAF(5%, 8 periods) = 486269*6.7864 = $3,300,000 (approx)

Since both the amounts are eqal the PV recorded = $3,300,000

2) Pretax amount to be related in balance sheet:

Balance on 30 June 2018

Payment on 31 Dec, 2018 (WN-1)

Balance on 31 Dec, 2018

Principal balance remaining on 30 June 2018 after first payment

principal payment on 31 Dec, 2018

3. Pre-tax amount of interest (WN-1) = $140,686.55

amortization expense = total lease payment during the period - interest payment = (486269*2) - 140686.55 = $831.851.45

Balance on 30 June 2018

3,300,000.00 Payment on 30, June 2018 -486,269.00

Payment on 31 Dec, 2018 (WN-1)

-345,582.45

Balance on 31 Dec, 2018

2,468,148.55

Related Questions

Navigate

• Browse (All)
• Browse O
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.