1. Determine the present value of the lease payments on June 30, 2024 that Georgia-Atlantic uses to record the right-of-use asset and lease liability. 2. What amount related to the lease would Georgia-Atlantic report in its balance sheet at December 31, 2024 (ignore taxes)? 3. What amount related to the lease would Georgia-Atlantic report in its income statement for the year ended December 31, 2024 (ignore taxes)?

1. Determine the present value of the lease payments on June 30, 2024 that Georgia-Atlantic uses to record the right-of-use asset and lease liability. 2. What amount related to the lease would Georgia-Atlantic report in its balance sheet at December 31, 2024 (ignore taxes)? 3. What amount related to the lease would Georgia-Atlantic report in its income statement for the year ended December 31, 2024 (ignore taxes)?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Leasing

Leasing is a contractual arrangement in which someone (a lessee) pays the owner (or lessor) of a building, land, vehicle, or other asset for the use of that asset. The lease is the agreement between lessee and lessor.

Question

On June 30, 2024, Georgia-Atlantic, Incorporated leased warehouse
equipment from IC Leasing Corporation. The lease agreement calls for
Georgia-Atlantic to make semiannual lease payments of $648,358 over a
four-year lease term, payable each June 30 and December 31, with the first
payment on June 30, 2024. Georgia-Atlantic's incremental borrowing rate is
10%, the same rate IC uses to calculate lease payment amounts.
Amortization is recorded on a straight-line basis at the end of each fiscal
year. The fair value of the equipment is $4.40 million.
Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of
$1, PVA of $1, FVAD of $1 and PVAD of $1)
Required:
1. Determine the present value of the lease payments on June 30, 2024
that Georgia-Atlantic uses to record the right-of-use asset and lease
liability.
2. What amount related to the lease would Georgia-Atlantic report in its
balance sheet at December 31, 2024 (ignore taxes)?
3. What amount related to the lease would Georgia-Atlantic report in its
income statement for the year ended December 31, 2024 (ignore
taxes)?
Note: For all requirements, enter your answers in whole dollars and not in
millions. Round your final answers to the nearest whole dollar.
1. Present value
2. Pretax amount for liability
2. Pretax amount for right-of-use asset
3. Pretax amount for interest expense
3. Pretax amount for amortization expense

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