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AT&T令 4:44 PM ezto.mheducation.com Question 1 (of 1. 10.00 points On June 30, 2016, Georgia-Atlantic, Inc., leased a warehouse facility from IC Leasing Corporation. The lease agreement calls for Georgia-Atlantic to make semiannual lease payments of $604,152 over a four-year lease term, payable each June 30 and December 31, with the first payment at June 30, 2016.Georgia-Atlantic’s incremental borrowing rate is 10%, the same rate IC used to calculate 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 $4.1. (FV of $1, PV of S1, FVA of $1. PVA of $1, EVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: Determine the present value of the lease payments at June 30, 2016 that Georgia-Atlantic used to record the leased asset and lease liability 2 What pretax amounts related to the lease would Georgia-Atlantic report in its balance sheet at December 31, 2016? What pretax amounts related to the lease would Georgia-Atlantic report in its income statement for the year ended December 31, 2016?
Expert Answer
| 1 | $604152*6.78637 = 4100000 |
| i=5 . N = 8 |
| 2 | Receivable at dec 31 2016 | Receivable |
| Initial Balance June 30,2016 | 4100000 | |
| June 30 2016 reduction | 604152 | |
| Dec 31 2016 reduction | 429360 | |
| Dec 31 2016 receivable | 3066488 |
| The receivable replaces the $4,100,000 building on the balancesheet |
| Calculations: | ||
| June 30, 2016*Lease receivable (present value calculated above) | 4100000 | |
| Cost of goods sold (lessor’s cost) | 4100000 | |
| Sales revenue (present value calculated above) | 4100000 | |
| Inventory of equipment (lessor’s cost) | 4100000 | |
| Cash (lease payment) | 604152 | |
| Lease receivable | 604152 | |
| December 31, 2016** Cash (lease payment) |
604152 | |
| Lease receivable (difference) | 429360 | |
| Interest revenue (5% × [$4,100,000 – 604152]) | 174792 |
3. Income effect for year ended December 31, 2016
June 30, 2016 interest revenue $0*
Dec. 31, 2016 interest revenue 174792**
Interest revenue for 2016 $174792
Sales revenue *4,100,000
Cost of goods sold * (4,100,000)
Income effect $ 174792
