Check my work On June 30, 2018, Georgia-Atlantic, Inc., leased a warehouse facil

Question

Check my work On June 30, 2018, Georgia-Atlantic, Inc., leased a warehouse facility from IC Leasing Corporation. The lease agreement calls for Georgia-Atlantic to make semiannual lease payments of $478,550 over a four-year lease term, payable each June 30 and December 31, with the first payment at June 30, 2018. Georgia Atlantic's incremental borrowing rate is 12%, the same rate IC uses to ca culate lease payment amounts. Depreciation is recorded on a straight-line basis at the end of each fiscal year. The fair value of the warehouse is $3.2. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) 2.58 points Required: eBook1. Determine the present value of the lease payments at June 30, 2018 that Georgia-Atlantic uses to record the right-of-use asset and Hint Print References lease liability. 2. What pretax amounts related to the lease would Georgia-Atlantic report in its balance sheet at December 31, 2018? 3. What pretax amounts related to the lease would Georgia-Atlantic report in its income statement for the year ended December 31, 2018? (For all requirements, enter your answers in whole dollars and not in millions. Round your final answer to nearest whole dollar.) 1. Present value 2. Pretax amount for liability Pretax amount for right-of-use asset 3. Pretax amount for interest expense Pretax amount for amortization expense

Explanation / Answer

Semiannual LeasePayment Amount $      478,550.00 term = 4 years = 8 periods Incremental Borrowing Rate = 12%/2 = 6% Fair Valu of Warehouse = $3.2 million 1 PV of lease Payment = Semiannual Lease Payment *SUM of PVF of 6% for 0-7 periods = 478550*(1+5.582381) $                                                                              3,149,998.43 $                                                                              3,150,000.00 (Round Off) 2 Opening Lease Balance on 30 june 18 $ 3,150,000.00 Less: Payment received on 30.06 $      478,550.00 Lease Balance as on 31.12.2018 $ 2,671,450.00 Less: Lease Principle Received $      318,263.00 (478550-2671450*.06) Lease Receivable as on 31.12.2018 $ 2,353,187.00 The receivable replaces the 3.2 Million Warehouse in Balance Sheet 3 Income affect for year ended 2018 30 June Intt Revenue $                       -   30 Dec Int Revenue $      160,287.00 [2671450*6%] Interest Revenue for year 2018 $      160,287.00 Sales $ 3,150,000.00 Less: Cost of Goods Sold $ 3,200,000.00 Income Effect $      110,287.00

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