On June 30, 2021, Georgia-Atlantic, Inc. leased warehouse equipment from IC Leasing Corporation. The lease agreement calls
Question:
On June 30, 2021, Georgia-Atlantic, Inc. leased warehouse equipment from IC Leasing Corporation. The lease agreement calls for Georgia-Atlantic to make semiannual lease payments of $562,907 over a 3-year lease term, payable each June 30 and December 31, with the first payment at June 30, 2021. Georgia-Atlantic's incremental borrowing rate is 10.0%, the same rate IC uses to calculate lease payment amounts. Amortization is recorded on a straight-line basis at the end of each fiscal year. The fair value of the equipment is $3 million
Required: 1. Determine the present value of the lease payments at June 30,2021 (to the nearest $000) that Georgia-Atlantic uses to record the right-of-use asset and lease liability? 2. What amount related to the lease would Georgia-Atlantic report in its balance sheet at December 31, 2021 (ignore taxes)? 3. What amounts related to the lease would Georgia-Atlantic report in its income statement for the year ended December 31, 2021 (ignore taxes)?
Intermediate Accounting
ISBN: 978-0470161012
9th Canadian Edition, Volume 2
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield.