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

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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 $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

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