CHAPTER 15, 9

PLEASE READ: this is ONE question with 3 different parts, please answer the FULL question, please TYPE your answer, please LABEL your answer.

On June 30, 2018, 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, payable each June 30 and December 31, with the first payment at June 30, 2018. 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, 2018. 2. What amounts related to the lease would Builders report in its balance sheet at December 31, 2018 (ignore taxes)? 3. What amounts related to the lease would Builders report in its income statement for the year ended December 31, 2018 (ignore taxes)? (For all requirements, enter your answers in whole dollars and not in millions. Round your final answer to nearest whole dollar) Answer is complete but not entirely correct. 1. Present value $3,799,998 2 Amount to be reported in the balance sheet 166,566 Amount to be reported in the income statement 166,566