Question

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 $468,683 over a 5-year lease term (also the asset's useful life), 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 Builders used to calculate lease payment amounts. Builders manufactured the equipment at a cost of $3.3 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. 2. 3. Present value Pretax net receivable Total pretax effect on net income

Answer 1

Ansurlo O semiannual lease. Payment to be received = $ 468,683. Total semiannual payments to be received = sw = 10 incremented borrowing verte = 104, 5.1. semianneal. Price at which brikdiens is ‘elling the speciprouato - semi comud beast payments x cumulative pu fattor - anneirly duc-for 10 poundy at 5%. = $ 468,683 x (1+(1+50x[i+54)) = $468,683 x 8.107821 = $3799998 porcscad vorhee = $ 3799998 @ semiannual-paymeal recived on 30-06-2001 = $ 462,683. pre-tex amcunt of liability on 30.06.2021-683799998–468,683)= 3331315 interest revenue for 31. 69.201 = $33313157548. = 166566 Semiannual lease payment received on 31.12.21 = $ 468,68 3. pie tax amount for receivable on Dec 31, 2001 = $3331315 +166566 - 468,683 = $ 3009198

las pre-fax ne recivable = $ 9029198 @ pre tax amount of interest revenue builder ine reports in its income statement .= $3231315 X5%, =$166.566 Prc-tex amonials related to the lease would beedchers report in its income statement for the year ended Dec 31, 2001 = $ 166566 + 3799998 - 3,300,000. = $ 666,564, on net income - $666,564