Exercise 15-5 (Algo) Sales-type lease; lessor; balance sheet and income statement effects [LO15-3] On June 30, 2024, Georgia-Atlantic, Incorporated leased warehouse equipment from Builders, Incorporated The lease agreement calls for Georgia-Atlantic to make semiannual lease payments of $512,709 over a 5-year lease term (also the asset's useful life), payable each June 30 and December 31, with the first payment on June 30, 2024. Georgia-Atlantic's incremental borrowing rate is 12.0%, the same rate Builders used to calculate lease payment amounts. Builders manufactured the equipment at a cost of $3.5 million Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Required: 1. Determine the price at which Builders is "selling" the equipment (present value of the lease payments) on June 30, 2024. 2. What amount related to the lease would Builders report in its balance sheet on December 31, 2024 (ignore taxes)? 3. What line item amounts related to the lease would Builders report in its income statement for the year ended December 31, 202 (ignore taxes)? Note: For all requirements, enter your answers in whole dollars and not in millions. Round the intermediate calculation and final answers to the nearest whole dollar. Answer is not complete. 1. Present value 2. Pretax net receivable 3. Total pretax effect on net income $ $ 4,000,000✔ 3,198,220 X
Exercise 15-5 (Algo) Sales-type lease; lessor; balance sheet and income statement effects [LO15-3] On June 30, 2024, Georgia-Atlantic, Incorporated leased warehouse equipment from Builders, Incorporated The lease agreement calls for Georgia-Atlantic to make semiannual lease payments of $512,709 over a 5-year lease term (also the asset's useful life), payable each June 30 and December 31, with the first payment on June 30, 2024. Georgia-Atlantic's incremental borrowing rate is 12.0%, the same rate Builders used to calculate lease payment amounts. Builders manufactured the equipment at a cost of $3.5 million Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Required: 1. Determine the price at which Builders is "selling" the equipment (present value of the lease payments) on June 30, 2024. 2. What amount related to the lease would Builders report in its balance sheet on December 31, 2024 (ignore taxes)? 3. What line item amounts related to the lease would Builders report in its income statement for the year ended December 31, 202 (ignore taxes)? Note: For all requirements, enter your answers in whole dollars and not in millions. Round the intermediate calculation and final answers to the nearest whole dollar. Answer is not complete. 1. Present value 2. Pretax net receivable 3. Total pretax effect on net income $ $ 4,000,000✔ 3,198,220 X
Financial Accounting: The Impact on Decision Makers
10th Edition
ISBN:9781305654174
Author:Gary A. Porter, Curtis L. Norton
Publisher:Gary A. Porter, Curtis L. Norton
Chapter10: Long-term Liabilities
Section: Chapter Questions
Problem 10.9E: Leased Assets Koffman and Sons signed a four-year lease for a forklift on January 1, 2016. Annual...
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Exercise 15-5 (Algo) Sales-type lease; lessor; balance sheet and income statement effects [LO15-3]
On June 30, 2024, Georgia-Atlantic, Incorporated leased warehouse equipment from Builders, Incorporated The lease agreement
calls for Georgia-Atlantic to make semiannual lease payments of $512,709 over a 5-year lease term (also the asset's useful life),
payable each June 30 and December 31, with the first payment on June 30, 2024. Georgia-Atlantic's incremental borrowing rate is
12.0%, the same rate Builders used to calculate lease payment amounts. Builders manufactured the equipment at a cost of $3.5 million.
Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)
Required:
1. Determine the price at which Builders is "selling" the equipment (present value of the lease payments) on June 30, 2024.
2. What amount related to the lease would Builders report in its balance sheet on December 31, 2024 (ignore taxes)?
3. What line item amounts related to the lease would Builders report in its income statement for the year ended December 31, 2024
(ignore taxes)?
Note: For all requirements, enter your answers in whole dollars and not in millions. Round the intermediate calculation and final
answers to the nearest whole dollar.
X Answer is not complete.
1. Present value
2. Pretax net receivable
3. Total pretax effect on net income
$
$
4,000,000
3,198,220](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F1d688b45-13e3-47e9-918d-7421070cfe4c%2F3f498835-5e8a-409a-ac03-0946f80d68a0%2Fbjogkt_processed.png&w=3840&q=75)
Transcribed Image Text:2
points
Exercise 15-5 (Algo) Sales-type lease; lessor; balance sheet and income statement effects [LO15-3]
On June 30, 2024, Georgia-Atlantic, Incorporated leased warehouse equipment from Builders, Incorporated The lease agreement
calls for Georgia-Atlantic to make semiannual lease payments of $512,709 over a 5-year lease term (also the asset's useful life),
payable each June 30 and December 31, with the first payment on June 30, 2024. Georgia-Atlantic's incremental borrowing rate is
12.0%, the same rate Builders used to calculate lease payment amounts. Builders manufactured the equipment at a cost of $3.5 million.
Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)
Required:
1. Determine the price at which Builders is "selling" the equipment (present value of the lease payments) on June 30, 2024.
2. What amount related to the lease would Builders report in its balance sheet on December 31, 2024 (ignore taxes)?
3. What line item amounts related to the lease would Builders report in its income statement for the year ended December 31, 2024
(ignore taxes)?
Note: For all requirements, enter your answers in whole dollars and not in millions. Round the intermediate calculation and final
answers to the nearest whole dollar.
X Answer is not complete.
1. Present value
2. Pretax net receivable
3. Total pretax effect on net income
$
$
4,000,000
3,198,220
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