Question

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 31, with the first payment at June 30, 2018. Georgia Atlantic's incremental borrow ng 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 of $648,358 over a four-year lease term, payable each June 30 and December warehouse is $44. (EV of S1. PV of S1. EVA of S1. PVA of S1. EVAD of S1 and PVAD of S) (Use appropriate foctorís) from the tables provided.) Required: 1. Determine the present value of the lease payments at June 30, 2018 that Georgia-Atlantic uses to record the right-of-use asset and lease liability. 2. What pretax amounts related to the lease would Georgia-Atlantic report in its balance sheet at December 31, 2018? 3. What pretax amounts related to the lease would Georgia-Atlantic report in its income statement for the year ended December 31 2018? (For all requirements, enter your answers in whole dollars and not in millions. Round your final answer to nearest whole dollar.) Present value 2. Pretax amount for liability Pretax amount for right-of-use asset 3. Pretax amount for interest expense Pretax amount for amortization expense

Answer 1

Ans: Georgia-Atlantic, Inc

Computation of Present value of Lease Payment
Date	Amount ($)	Present Value Factor @10 %	Present Value($)
30,June,2018	$648,358	0.95	$617,484
31,Dec,2018	$648,358	0.91	$588,080
30,June,2019	$648,358	0.86	$560,076
31,Dec,2019	$648,358	0.82	$533,406
30,June,2020	$648,358	0.78	$508,005
31,Dec,2020	$648,358	0.75	$483,815
30,June,2021	$648,358	0.71	$460,776
31,Dec,2021	$648,358	0.68	$438,834
Present value of Lease Payment			$4,190,476

1) Present value of Lease payment on 30.June.2018 $617,484

2) Pre tax Amount to be shown in the Balance Sheet as on 31.Dec.2018

Pre Tax Amount of Liability		$4,190,476
Pre Tax Amount for right of use Assets	($438,834+$460,776)	$899,610
Pre Tax amount to be Shown in the Balance sheet		$3,290,866

3)

Computation of Interest Expenses
Date	Cash paid	Interest Expenses	Increase in Carrying Value	Carrying Value
1.Jan.2018				$4,190,476
30,June,2018	$648,358	$209,524	-$438,834	$3,751,641
31,Dec,2018	$648,358	$187,582	-$460,776	$3,290,866
Interest Expenses for 2018		$397,106

Pre Tax Interest Expenses to be appear in Income statement for December 2018 is $397,106 and this is the amount that will be Amortized expenses in 2018 .