Intermediate Accounting: E15-8 On June 30, 2013, Georgia-Atlantic, Inc. leased a warehouse from IC
Intermediate Accounting E15-8 Capital lease; lessee; balance sheet and income statement effects On June 30, 2013, Georgia-Atlantic, Inc. leased a warehouse from IC Leasing Corporation. The lease calls for Georgia-Atlantic to make semiannaual lease payments of $562,907 over 3 year lease term payable on June 30 and December 31,with first payment at June 30, 2013. Georgia-Atlantic's incremental borrowing rate is 10%, the same rate IC used to calculate the payments. Depreciation is recorded on a straight-line basis at the end of each fiscl year. The fair value of the warehouse is $3 million.
Required: 1. Determine the present value of the lease payments at June 30, 2013 (to the nearest $000) that Georgia-Atlantic uses to record the leased asset and lease liability. 2. What pretax amounts related to the lease would Georgia-Atlantic report in the balance sheet at Dec. 31,2013? 3. What pretax amount related to the lease would Georgia-Atlantic report in the income statement on Dec. 31,2013?