E 15 3

Finance lease; lessee; balance sheet and income statement effects

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 $562,907 over a three-year lease term, payable each June 30 and December 31, with the first payment at June 30, 2018. Georgia-Atlantics incremental borrowing rate is 10%, the same rate IC uses 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 $3 million.

1. Present value of the lease payments at 6/30/18 for Georgia-Atlantic to record right-of-use asset.
2. Amounts related to the lease Georgia-Atlantic reports in its balance sheet at 12/31/18.
3. Amounts related to the lease Georgia-Atlantic reports in its income statement for year ended 12/31/18.

Requirement 1 - Present Value of the Lease Payments

Requirement 2- Balance Sheet December 31, 2018 Requirement 3 - Income Statement December 31, 2018 June 30, 2018 interest expense. Dec. 31, 2018 Interest expense for 2018 Depreciation expense for 2018 Total expenses