Exercise 15-3 (Algo) Finance lease; lessee; balance sheet and income statement effects [LO15-2] 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 $403,067 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 8%, 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 $3.40 million. Note: Use tables, Excel, or a financial calculator. (FV of $1. PV of $1. EVA of $1. PVA of $1. EVAD 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
Exercise 15-3 (Algo) Finance lease; lessee; balance sheet and income statement effects [LO15-2] 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 $403,067 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 8%, 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 $3.40 million. Note: Use tables, Excel, or a financial calculator. (FV of $1. PV of $1. EVA of $1. PVA of $1. EVAD 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
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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![Exercise 15-3 (Algo) Finance lease; lessee; balance sheet and income statement effects [LO15-2]
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 $403,067 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 8%, 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 $3.40 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](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F944787db-1369-43c8-9dbf-8e8809585dad%2Fdb71784e-e8a0-43eb-bf5a-48af3340fc46%2Fopt513_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Exercise 15-3 (Algo) Finance lease; lessee; balance sheet and income statement effects [LO15-2]
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 $403,067 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 8%, 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 $3.40 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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