Solution 1:
Semiannual lease payment to be received = $478,767
Total semiannual payments to be received = 4*2 = 8
Incremental borrowing rate = 9%, 4.5% semiannual
Price at which Builders is “selling” the equipment = Semi Annual lease payments * Cumulative PV Factor of annuity due for 8 periods at 4.5%
= $478,767 * 6.89270 = $3,300,000
Solution 2:
Semiannual payment received on 30.06.2021 = $478,767
Pretax amount of liability on 30.06.2021 = ($3,300,000 - $478,767) = $2,821,233
Interest revenue for 31.12.2021 = $2,821,233 * 4.5% = $126,955
Semiannual lease payment received on 31.12.2021 = $478,767
Pre tax amount for receivables on December 31, 2021 = $2,821,233 + $126,955 - $478,767 = $2,469,421
Solution 3:
Pre tax amount of interest Revenue Builder Inc. reports in its income statement = $2,821,233 * 4.5% = $126,955
Pre tax amount of revenue Builder Inc. reports in its income statement = $3,300,000
Pre tax amount of cost of goods sold to be reported by Builder Inc. in its income statement = $2,800,000
Pretax amounts related to the lease would Builders report in its income statement for the year ended December 31, 2021 = $126,955 + $3,300,000 - $2,800,000 = $626,955
On June 30, 2021, Georgia Atlantic, Inc. leased warehouse equipment from Builders, Inc. The lease agreement...
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 $604,355 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 $4.4 million. (FV of $1,...
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,...
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 $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 at June 30, 2021. 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 (FV of $1....
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 $736,771 over a 4-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 $4.5 million. (EV of...
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 $562,907 over a three-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%, the same rate Builders used to calculate lease payment amounts. Builders manufactured the equipment at a cost of $2.5 million. (FV of $1, PV...
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 $880,440 over a 3-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 8.0%, the same rate Builders used to calculate lease payment amounts. Builders manufactured the equipment at a cost of $4.3 million. (FV of $1, PV...
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 $486,146 over a 4-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 12.0%, the same rate Builders used to calculate lease payment amounts. Builders manufactured the equipment at a cost of $2.7 million. (FV of $1, PV...
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 $880,440 over a 3-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 8.0%, the same rate Builders used to calculate lease payment amounts. Builders manufactured the equipment at a cost of $4.3 million. (FV of $1, PV...
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 $880,440 over a 3-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 8.0%, the same rate Builders used to calculate lease payment amounts. Builders manufactured the equipment at a cost of $4.3 million. (FV of $1, PV...
help 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 $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 at June 30, 2021. 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 (FV...