On June 30, 2016, Georgia-Atlantic, Inc., leased a warehouse facility from Builders, Inc. 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, 2016. Georgia-Atlantic’s incremental borrowing rate is 10%, the same rate Builders used to calculate lease payment amounts. Builders constructed the warehouse at a cost of $2.5 million. Required: 1. Determine the price at which Builders is “selling” the warehouse (present value of the lease payments) at June 30, 2016 (to the nearest $000). 2. What amounts related to the lease would Builders report in its balance sheet at December 31, 2016 (ignore taxes)? 3. What amounts related to the lease would Builders report in its income statement for the year ended December 31, 2016 (ignore taxes)?
On June 30, 2016, Georgia-Atlantic, Inc., leased a warehouse facility from Builders, Inc. 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, 2016. Georgia-Atlantic’s incremental borrowing rate is 10%, the same rate Builders used to calculate lease payment amounts. Builders constructed the warehouse at a cost of $2.5 million. Required: 1. Determine the price at which Builders is “selling” the warehouse (present value of the lease payments) at June 30, 2016 (to the nearest $000). 2. What amounts related to the lease would Builders report in its balance sheet at December 31, 2016 (ignore taxes)? 3. What amounts related to the lease would Builders report in its income statement for the year ended December 31, 2016 (ignore taxes)?
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