Ch 8 On June 30, 2018, Georgia- Atlantic, Inc., leased warehouse equipment from

Question

Ch 8 On June 30, 2018, Georgia- Atlantic, Inc., leased warehouse equipment from IC Leasing Corporation Georgia-Atlantic to make semiannual lease payments of $677,829 over a four-year lease term, payable 31, with the first payment at June 30, 2018. Georgia-Atlantic's incremental The lease agreement calls for each June 30 and December borrowing rate is 10%, the same rate IC used to calculate S, EVAD)o St amd VAD o si e aehouseeon rildters nse.et cost of $4 6 million. (EV of S, EV of S. EVA ot 5i. EVA of Required: 1. What pretax amounts related to the lease would IC report in its balance sheet at December 31, 2018? 2. What pretax amounts related to the lease would IC report in its income statement for the year ended December 31, 2018? Hint (For all requirements, enter your answers in whole dollars and not in millions. Round your final answers to nearest whole dolla) 1 Pretax amount of net receivable 2 Pretax amount of interest revenue

Explanation / Answer

Answer 1. Value of Lease receivable = $677,829 X 6.78637 Value of Lease receivable = $4,600,000 (Approx.) Net Receivable - Dec 31, 2018 Intial Balance    4,600,000.00 June 30, 2018 Reduction        677,829.00 Dec 31, 2018, Reduction ($677,829 - $196,109)        481,720.00 Net Receivable - Dec 31, 2018    3,440,451.00 Interest on Dec 31, 2018 Payment = ($4,600,000 - $677,829) X 10% X 6/12 Interest on Dec 31, 2018 Payment = $196,109 (Approx.) Answer 2. Pretax Amount of interest Revenue Interest Revenue June 30, 2018 - Receipt                         -   Dec 31, 2018, Receipt        196,109.00 Total Interest Revenue        196,109.00

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