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On June 30, 2021, Georgia - Atlantic, Inc. leased a warehouse equipment from IC Leasing Corporation. The lease agreement calls for Georgia - Atlantic to make semiannual lease payments of $559,946 over a four- year lease term, payable each June 30 and December 31, with the first payment at June 30, 2021. 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 $3.8 million. (FV of S1, PV of $1, FVA of S1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. Determine the present value of the lease payments at June 30, 2021 that Georgia - Atlantic uses to record 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, 2021? 3. What pretax amounts related to the lease would Georgia - Atlantic report in its income statement for the year ended December 31, 2021?

On June 30, 2021, Georgia - Atlantic, Inc. leased a warehouse equipment from IC Leasing Corporation. The lease agreement calls for Georgia - Atlantic to make semiannual lease payments of $559,946 over a four- year lease term, payable each June 30 and December 31, with the first payment at June 30, 2021. 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 $3.8 million. (FV of S1, PV of $1, FVA of S1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. Determine the present value of the lease payments at June 30, 2021 that Georgia - Atlantic uses to record 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, 2021? 3. What pretax amounts related to the lease would Georgia - Atlantic report in its income statement for the year ended December 31, 2021?

FINANCIAL ACCOUNTING
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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On June 30, 2021, Georgia - Atlantic, Inc. leased a warehouse equipment from IC Leasing Corporation. The lease agreement calls for Georgia - Atlantic to make semiannual lease payments of $559,946 over a four- year lease term, payable each June 30 and December 31, with the first payment at June 30, 2021. 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 $3.8 million. (FV of S1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. Determine the present value of the lease payments at June 30, 2021 that Georgia - Atlantic uses to record 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, 2021? 3. What pretax amounts related to the lease would Georgia - Atlantic report in its income statement for the year ended December 31, 2021?
Transcribed Image Text:On June 30, 2021, Georgia - Atlantic, Inc. leased a warehouse equipment from IC Leasing Corporation. The lease agreement calls for Georgia - Atlantic to make semiannual lease payments of $559,946 over a four- year lease term, payable each June 30 and December 31, with the first payment at June 30, 2021. 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 $3.8 million. (FV of S1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. Determine the present value of the lease payments at June 30, 2021 that Georgia - Atlantic uses to record 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, 2021? 3. What pretax amounts related to the lease would Georgia - Atlantic report in its income statement for the year ended December 31, 2021?
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