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Exercise 15-8 Capital lease; lessee; balance sheet and income statement effects [LO15-5] On June 30, 2016,...
Exercise 15-8 Capital lease; lessee; balance sheet and income statement effects [LO15-5] On June 30, 2016, Georgia-Atlantic, Inc., leased a warehouse facility from IC Leasing Corporation. The lease agreement calls for Georgia-Atlantic to make semiannual lease payments of $648,358 over a four-year lease term, payable each June 30 and December 31, with the first payment at June 30, 2016.Georgia-Atlantic’s incremental borrowing rate is 10%, the same rate IC used 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 $4.4. (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 present value of the lease payments at June 30, 2016 that Georgia-Atlantic used to record the leased asset and lease liability. 2. What pretax amounts related to the lease would Georgia-Atlantic report in its balance sheet at December 31, 2016? 3. What pretax amounts related to the lease would Georgia-Atlantic report in its income statement for the year ended December 31, 2016?
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ekkarill92 answered 1 year agoRelated Solutions
Exercise 15-3 Finance lease; lessee; balance sheet and income statement effects [LO15-2] On June 30, 2018,...
Exercise 15-3 Finance lease; lessee; balance sheet and income
statement effects [LO15-2] 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 $559,946 over a four-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...
Brief Exercise 15-6 Sales-type lease; lessor; income statement effects [LO15-3] A lease agreement that qualifies as...
Brief Exercise 15-6 Sales-type lease; lessor; income statement
effects [LO15-3]
A lease agreement that qualifies as a finance lease calls for
annual lease payments of $50,000 over a four-year lease term (also
the asset’s useful life), with the first payment at January 1, the
beginning of the lease. The interest rate is 7%. The lessor’s
fiscal year is the calendar year. The lessor manufactured this
asset at a cost of $144,000. (FV of $1, PV of $1, FVA of $1,...
Exercise 15-12 Lessor calculation of annual lease payments; lessee calculation of asset and liability [LO15-5] Each...
Exercise 15-12 Lessor calculation of annual lease payments;
lessee calculation of asset and liability [LO15-5] Each of the
three independent situations below describes a capital lease in
which annual lease payments are payable at the beginning of each
year. The lessee is aware of the lessor’s implicit rate of return.
(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.) Situation
1 2 3...
Exercise 15-12 Lessor calculation of annual lease payments; lessee calculation of asset and liability [LO15-5] Each...
Exercise 15-12 Lessor calculation of annual lease payments;
lessee calculation of asset and liability [LO15-5] Each of the
three independent situations below describes a capital lease in
which annual lease payments are payable at the beginning of each
year. The lessee is aware of the lessor’s implicit rate of return.
(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.) Situation
1 2 3...
Exercise 15-29 (Algo) Finance lease; purchase options; lessee [LO15-2, 15-6] Federated Fabrications leased a tooling machine...
Exercise 15-29 (Algo) Finance lease; purchase options; lessee
[LO15-2, 15-6]
Federated Fabrications leased a tooling machine on January 1,
2021, for a three-year period ending December 31, 2023. The lease
agreement specified annual payments of $49,000 beginning with the
first payment at the beginning of the lease, and each December 31
through 2022. The company had the option to purchase the machine on
December 30, 2023, for $58,000 when its fair value was expected to
be $73,000, a sufficient difference...
Exercise 15-17 Lessee and lessor; operating lease [LO15-4] On January 1, 2018, Nath-Langstrom Services, Inc., a...
Exercise 15-17 Lessee and lessor; operating lease [LO15-4]
On January 1, 2018, Nath-Langstrom Services, Inc., a computer
software training firm, leased several computers under a two-year
operating lease agreement from ComputerWorld Leasing, which
routinely finances equipment for other firms at an annual interest
rate of 4%. The contract calls for four rent payments of $18,000
each, payable semiannually on June 30 and December 31 each year.
The computers were acquired by ComputerWorld at a cost of $106,000
and were expected...
Exercise 15-17 Lessee and lessor; operating lease [LO15-4] On January 1, 2018, Nath-Langstrom Services, Inc., a...
Exercise 15-17 Lessee and lessor; operating lease [LO15-4] On
January 1, 2018, Nath-Langstrom Services, Inc., a computer software
training firm, leased several computers under a two-year operating
lease agreement from ComputerWorld Leasing, which routinely
finances equipment for other firms at an annual interest rate of
4%. The contract calls for four rent payments of $10,000 each,
payable semiannually on June 30 and December 31 each year. The
computers were acquired by ComputerWorld at a cost of $90,000 and
were expected...
Explain the difference in lessee income statement and balance sheet presentation for a finance versus an...
Explain the difference in lessee income statement and balance
sheet presentation for a finance versus an operating lease.
Exercise 15-8 Selected Financial Ratios [LO15-2, LO15-3, LO15-4] The financial statements for Castile Products, Inc., are...
Exercise 15-8 Selected Financial Ratios [LO15-2, LO15-3,
LO15-4]
The financial statements for Castile Products, Inc., are given
below:
Castile Products, Inc.
Balance Sheet
December 31
Assets
Current assets:
Cash
$
21,000
Accounts receivable, net
170,000
Merchandise inventory
380,000
Prepaid expenses
6,000
Total current assets
577,000
Property and equipment, net
840,000
Total assets
$
1,417,000
Liabilities and Stockholders'
Equity
Liabilities:
Current liabilities
$
260,000
Bonds payable, 11%
330,000
Total liabilities
590,000
Stockholders’ equity:
Common stock, $10 par value
$
190,000
Retained...
Exercise 15-8 Selected Financial Ratios [LO15-2, LO15-3, LO15-4] The financial statements for Castile Products, Inc., are...
Exercise 15-8 Selected Financial Ratios [LO15-2, LO15-3, LO15-4]
The financial statements for Castile Products, Inc., are given
below: Castile Products, Inc. Balance Sheet December 31 Assets
Current assets: Cash $ 23,000 Accounts receivable, net 200,000
Merchandise inventory 330,000 Prepaid expenses 8,000 Total current
assets 561,000 Property and equipment, net 870,000 Total assets $
1,431,000 Liabilities and Stockholders' Equity Liabilities: Current
liabilities $ 300,000 Bonds payable, 11% 350,000 Total liabilities
650,000 Stockholders’ equity: Common stock, $10 par value $ 120,000
Retained...
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