Answered step by step
Verified Expert Solution
Question
1 Approved Answer
On June 30, 2021, Georgia-Atlantic, Inc. leased warehouse equipment from Builders, Inc. The lease agreement calls for Georgia- Atlantic to make semiannual lease payments of
On June 30, 2021, Georgia-Atlantic, Inc. leased warehouse equipment from Builders, Inc. The lease agreement calls for Georgia- Atlantic to make semiannual lease payments of $681,881 over a 4-year lease term (also the asse ear lease term (also the asset's useful life), payable each June 30 and December 31, with the first payment at June 30, 2021. Georgla-Atlantic's Incremental borrowing rate is 9.0%, the same rate Builders used to calculate lease payment amounts. Builders manufactured the equipment at a cost of $4.2 million. (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.) Required: 1. Determine the price at which Builders is "selling the equipment (present value of the lease payments) at June 30, 2021. 2. What amount related to the lease would Builders report In its balance sheet at December 31, 2021 (Ignore taxes)? 3. What line item amounts related to the lease would Builders report In Its Income statement for the year ended December 31, 2021 (Ignore taxes)? (For all requirements, enter your answers in whole dollars and not In millions. Round your final answer to the nearest whole dollar.) 1. Present value Amount to be reported in the balance sheet Amount to be reported in the income statement On June 30, 2021, Georgia-Atlantic, Inc. leased warehouse equipment from Builders, Inc. The lease agreement calls for Georgia- Atlantic to make semiannual lease payments of $681,881 over a 4-year lease term (also the asse ear lease term (also the asset's useful life), payable each June 30 and December 31, with the first payment at June 30, 2021. Georgla-Atlantic's Incremental borrowing rate is 9.0%, the same rate Builders used to calculate lease payment amounts. Builders manufactured the equipment at a cost of $4.2 million. (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.) Required: 1. Determine the price at which Builders is "selling the equipment (present value of the lease payments) at June 30, 2021. 2. What amount related to the lease would Builders report In its balance sheet at December 31, 2021 (Ignore taxes)? 3. What line item amounts related to the lease would Builders report In Its Income statement for the year ended December 31, 2021 (Ignore taxes)? (For all requirements, enter your answers in whole dollars and not In millions. Round your final answer to the nearest whole dollar.) 1. Present value Amount to be reported in the balance sheet Amount to be reported in the income statement
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started