On June 30, 2024, Georgia-Atlantic, Incorporated leased warehouse equipment from IC Leasing Corporation. The lease agreementcalls for Georgia-Atlantic to make semiannual lease payments of $414,415 over a five-year lease term, payable each June 30 andDecember 31, with the first payment on June 30, 2024. Georgia-Atlantic's incremental borrowing rate is 10%, the same rate IC uses tocalculate lease payment amounts. Amortization is recorded on a straight-line basis at the end of each fiscal year. The fair value of theequipment is $3.36 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 assetand 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 wholedollar.1. Present value2. Pretax amount for liability2. Pretax amount for right-of-use asset3. Pretax amount for interest expense3. Pretax amount for amortization expense

Lease:A lease is a written agreement where one party allows the another party to use his/her assets…

Answered: December 31, with the first payment on…

December 31, with the first payment on June 30, 2024. Geo calculate lease payment amounts. Amortization is recorded equipment is $3.36 million.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Q: A finance lease agreement calls for quarterly lease payments of $7,728 over a 10-year lease term,…

A: a.DateLease paymentEffective interestDecrease in balanceOutstanding balanceJuly 1 184,000July…

Q: On January 1, 2021, Flackmon Company entered into a lease for a truck with a payment of $16,000 per…

A: The lessee's income statement shows the amortization expenditure associated with the leased asset as…

Q: On September 30, 2024, Truckee Garbage leased equipment from a supplier and agreed to pay $125,000…

A: Present value is the current value of a future sum of money given at a specified rate of…

Q: Manufacturers Southern leased high-tech electronic equipment from International Machines on January…

A: Calculation of lease payments and recording of journal entry are as follows

Q: Manufacturers Southern leased high-tech electronic equipment from Edison Leasing on January 1, 2021.…

A: Journal entries show the recording of transactions during an accounting year and every transaction…

Q: 1. Computing the Annual Lease Payments On January 1, 2020, Alpha Inc. leased equipment to Omega…

A: Annual payment can be calculated using the formula of the present value of annuity due. Present…

Q: Manufacturers Southern leased high-tech electronic equipment from Edison Leasing on January 1, 2024.…

A: A leasing schedule is part of a master lease agreement. Although it may include other details such…

Q: On January 1, 2021, Wetick Optometrists leased diagnostic equipment from Southern Corp., which had…

A: Lease: Lease is a contractual agreement whereby the right to use an asset for a particular period of…

Q: On June 1, 2024, First National leased a building. The lease agreement calls for First National to…

A: Lease: It implies to a contract where by one party (lessor) agrees to grant the right of using an…

Q: Edison Leasing leased high-tech electronic equipment to Manufacturers Southern on January 1, 2024.…

A: A lease schedule is part of a master lease agreement. Although it may include other details such as…

Q: Wildhorse Manufacturing Ltd. has signed a lease agreement with Blossom Leasing Inc. to lease some…

A: The term "lease" refers to a contract between two business entities under which one provides an…

Q: Company A leases equipment from Company B in a finance lease. Lease payments of $3,226 are due…

A: The right-to-use asset is the amount that is recorded by the lessee in its balance sheet that…

Q: The Metro Company (lessee) leased equipment from Denver Industries on January 1, 2021. Denver…

Q: Required: 1. Determine CPS Transportation's income tax expense and net income for the year ended…

A: Income before income taxes$900,000Less: Income tax expense:Current (25% x [$900,000 -…

Q: Determine the Fair Value (rounded off) of the leased asset.

Q: Manji

A: This is the present value of the lease payments, calculated using the interest rate and the amount…

Q: Using an 6 percent interest rate, the present value of the lease payments is $1,950,423. The first…

A: Given information: Interest rate = 6% present value of the lease payments is $1,950,423 Lease…

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 $414,415 over a five-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 $3.36 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

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1: Explain lease

VIEW

Step 2: Calculate present value of lease

VIEW

Step 3: Calculate pretax amount of liability and right to use asset

VIEW

Step 4: Calculate pretax amount amount of interest and amortization expense

VIEW

Solution

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 5 steps with 1 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

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 $530,203 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 12%, 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 $3.49 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…
On January 1, 2021, the lessee company signed an operating lease to lease a building from the lessor. The lease arrangement is for 8 years. Lease payments are $168,000 per year and are made at the beginning of the year. The lessee incurred initial direct costs of $65,000. Assume the following is the partial Lease Amortization Schedule (with only two rows and three columns shown) prepared by the lessee company: Date Annual Payment Interest on Liability 1/1/2022 168,000 40,000 1/1/2023 168,000 36,000 In the journal entry made on December 31, 2022, the lessee company should debit/credit Right-of-Use Asset by $___________. (Just enter the amount. Do not put a plus or minus sign in front of the amount.)
Fitbit Ltd has leased a machine on the following terms: Date of entering lease 1 July 2019 Duration of lease 5 years Life of asset 6 years Unguaranteed residual value $40,000 Lease payments inception (at the start) $60,000 Annual payments (5) $65,000 Implied rate 11.0 %. Please assist to determine the Fair Value (rounded off) of the leased asset. Thanks
On January 1, 2025, Splish Brothers Co. leased a building to Sunland Inc. The relevant information related to the lease is as follows. 1. The lease arrangement is for 10 years. The building is expected to have a residual value at the end of the lease of $3,900,000 (unguaranteed). 2. The leased building has a cost of $4,400,000 and was purchased for cash on January 1, 2025. 3. The building is depreciated on a straight-line basis. Its estimated economic life is 50 years with no salvage value. 4. Lease payments are $295,000 per year and are made at the beginning of the year. 5. Sunland has an incremental borrowing rate of 8%, and the rate implicit in the lease is unknown to Sunland. 6. Both the lessor and the lessee are on a calendar-year basis. QUESTION: Prepare the journal entries that Sunland should make in 2025. (List all debit entries before credit entries. Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 0 decimal…
Manufacturers Southern leased high-tech electronic equipment from Edison Leasing on January 1, 2024. Edison purchased the equipment from International Machines at a cost of $117,772. 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) Related Information: Lease term Quarterly rental payments Economic life of asset Fair value of asset Implicit interest rate (Also lessee's incremental borrowing rate) Required: Prepare a lease amortization schedule and appropriate entries for Manufacturers Southern from the beginning of the lease through January 1, 2025. Amortization is recorded at the end of each fiscal year (December 31) on a straight-line basis. Amortiz... General Schedule Journal Answer is not complete. Complete this question by entering your answers in the tabs below. No 1 Record the appropriate entries for Manufacturers Southern from the beginning of the lease through January 1, 2025. Amortization is recorded at…
A lease with the following terms: Lease period: 5 years, beginning January 1, 2016. Non - cancelable.. Rental amount: $65,000 payable annually in advance (at the beginning of year); includes $5,000 executory costs. The first lease payment is made on January 1, 2016, and four subsequent payments are made on each December 31 (Balance Sheet date). • Estimated economic life of equipment: 5 years. • Expected residual value: none. Both implicit and incremental rates: 10% Required: On behalf of Lessee and Lessor, (a ) Prepare the lease payment schedule to show the lease liabilities and interest expense over the lease period. (b) Provide all journal entries in the year of 2016. (c) Show statement of financial position (extract) at 31 December 2016 in respect of lease.
Braun Company acquired a piece of equipment from Tipper Company under a lease. The lease requires five annual lease payments of $30,000 with the first payment due when the lease begins, on January 1, 2022. Future lease payments are due on January 1 of each year of the lease term. The interest rate in the lease is 6%. What amount should Braun Company debit the equipment account on the date of acquisition?
Manufacturers Southern leased high-tech electronic equipment from International Machines on January 1, 2024. International Machines manufactured the equipment at a cost of $105,000. Manufacturers Southern's fiscal year ends December 31. 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) Related Information: Lease term Quarterly rental payments Economic life of asset Fair value of asset Implicit interest rate Required: 2 years (8 quarterly periods) $ 17,000 2 at the beginning of each period years $ 127,024 8% 1. Show how International Machines determined the $17,000 quarterly lease payments. 2. Prepare appropriate entries for International Machines to record the lease at its beginning, January 1, 2024, and the second lease payment on April 1, 2024. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Show how International Machines determined the $17,000 quarterly lease payments.…
Manufacturers Southern leased high-tech electronic equipment from International Machines on January 1, 2024. International Machines manufactured the equipment at a cost of $101,000. Manufacturers Southern's fiscal year ends December 31. 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) Related Information: Lease term Quarterly rental payments Economic life of asset Fair value of asset Implicit interest rate Required 1 Required 2 Required: 1. Show how International Machines determined the $18,000 quarterly lease payments. 2. Prepare appropriate entries for International Machines to record the lease at its beginning, January 1, 2024, and the second lease payment on April 1, 2024. PV factors based on Table or Calculator function: PV of Lease 2 Complete this question by entering your answers in the tabs below. Lease Payment $ 18,000 2 $ 132,289 n = 10% Show how International Machines determined the $18,000 quarterly…
s
A finance lease agreement calls for quarterly lease payments of $5,376 over a 10-year lease term, with the first payment on July 1, the beginning of the lease. The annual interest rate is 8%. Both the present value of the lease payments and the cost of the asset to the lessor are $150,000. Required: a. Prepare a partial amortization table up to the October 1 payment. b. What would be the amount of interest expense (revenue) the lessee (lessor) would record in conjunction with the second quarterly payment on October 1? Complete this question by entering your answers in the tabs below Required ARequired B What would be the amount of interest expense (revenue) the lessee (lessor) would record in conjunction with the second quarterly payment on October 1? Interest expense (Lessee) Interest revenue (Lessor) K Required A
Hw.147.