On June 30, 2018, Georgia-Atlantic, Inc. leased a warehouse facility from IC Leasing Corporation. The leaseagreement calls for Georgia-Atlantic to make semiannual lease payments of $562,907 over a three-year leaseterm, payable each June 30 and December 31, with the first payment at June 30, 2018. Georgia-Atlantic’s incremental borrowing rate is 10%, the same rate IC uses to calculate lease payment amounts. Depreciation is recordedon a straight-line basis at the end of each fiscal year. The fair value of the warehouse is $3 million.Required:1. Determine the present value of the lease payments at June 30, 2018 (to the nearest $000) that GeorgiaAtlantic uses to record the right-of-use asset and lease liability.2. What amounts related to the lease would Georgia-Atlantic report in its balance sheet at December 31,2018 (ignore taxes)?3. What amounts related to the lease would Georgia-Atlantic report in its income statement for the year endedDecember 31, 2018 (ignore taxes)?
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-Atlantic’s 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.
Required:
1. Determine the present value of the lease payments at June 30, 2018 (to the nearest $000) that GeorgiaAtlantic uses to record the right-of-use asset and lease liability.
2. What amounts related to the lease would Georgia-Atlantic report in its balance sheet at December 31,
2018 (ignore taxes)?
3. What amounts related to the lease would Georgia-Atlantic report in its income statement for the year ended
December 31, 2018 (ignore taxes)?
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