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page 885 E 15-3 Finance lease; lessee; balance sheet and income statement effects • LO15-2 (Note: E 15-3, 15-4, and 15-5 are three variations of the same situation.) On June 30, 2021, Georgia-Atlantic, Inc. leased warehouse equipment from IC Leasing Corporation. The lease agreement calls for Georgia-Atlantic to make semiannual lease payments of $562,907 over a three-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 million. Required: 1. Determine the present value of the lease payments at June 30, 2021 (to the nearest $000) that Georgia- Atlantic uses to record the right-of-use asset and lease liability. 2. What amounts related to the lease would Georgia-Atlantic report in its balance sheet at December 31, 2021 (ignore taxes)? 3. What amounts related to the lease would Georgia-Atlantic report in its income statement for the year ended December 31, 2021 (ignore taxes)?

page 885 E 15-3 Finance lease; lessee; balance sheet and income statement effects • LO15-2 (Note: E 15-3, 15-4, and 15-5 are three variations of the same situation.) On June 30, 2021, Georgia-Atlantic, Inc. leased warehouse equipment from IC Leasing Corporation. The lease agreement calls for Georgia-Atlantic to make semiannual lease payments of $562,907 over a three-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 million. Required: 1. Determine the present value of the lease payments at June 30, 2021 (to the nearest $000) that Georgia- Atlantic uses to record the right-of-use asset and lease liability. 2. What amounts related to the lease would Georgia-Atlantic report in its balance sheet at December 31, 2021 (ignore taxes)? 3. What amounts related to the lease would Georgia-Atlantic report in its income statement for the year ended December 31, 2021 (ignore taxes)?

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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page 885 E 15-3 Finance lease; lessee; balance sheet and income statement effects • LO15-2 (Note: E 15-3, 15-4, and 15–5 are three variations of the same situation.) On June 30, 2021, Georgia-Atlantic, Inc. leased warehouse equipment from IC Leasing Corporation. The lease agreement calls for Georgia-Atlantic to make semiannual lease payments of $562,907 over a three-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 million. Required: 1. Determine the present value of the lease payments at June 30, 2021 (to the nearest $000) that Georgia- Atlantic uses to record the right-of-use asset and lease liability. 2. What amounts related to the lease would Georgia-Atlantic report in its balance sheet at December 31, 2021 (ignore taxes)? 3. What amounts related to the lease would Georgia-Atlantic report in its income statement for the year ended December 31, 2021 (ignore taxes)?
Transcribed Image Text:page 885 E 15-3 Finance lease; lessee; balance sheet and income statement effects • LO15-2 (Note: E 15-3, 15-4, and 15–5 are three variations of the same situation.) On June 30, 2021, Georgia-Atlantic, Inc. leased warehouse equipment from IC Leasing Corporation. The lease agreement calls for Georgia-Atlantic to make semiannual lease payments of $562,907 over a three-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 million. Required: 1. Determine the present value of the lease payments at June 30, 2021 (to the nearest $000) that Georgia- Atlantic uses to record the right-of-use asset and lease liability. 2. What amounts related to the lease would Georgia-Atlantic report in its balance sheet at December 31, 2021 (ignore taxes)? 3. What amounts related to the lease would Georgia-Atlantic report in its income statement for the year ended December 31, 2021 (ignore taxes)?
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