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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 $779,224 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 9.0%, the same rate Builders used to calculate lease payment amounts. Builders manufactured the equipment at a cost of $3.7 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, 2021. 2. What amount related to the lease would Builders report in its balance sheet at December 31, 2021 (ignore taxes)? 3. What line item amounts related to the lease would Builders report in its income statement for the year ended December 31, 2021 (ignore taxes)? (For all requirements, enter your answers in whole dollars and not in millions. Round your final answer to the nearest whole dollar.) 1. 2 Present value Pretax net receivable Total pretax effect on net income 3. Each of the four independent situations below describes a finance 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.) 4 Lease term (years) Lessor's rate of return Fair value of lease asset Lessor's cost of lease asset Residual value: Estimated fair value Guaranteed fair value 9% 4 10% $70,000 $70,000 Situation 2 3 7 5 11% $370,000 $ 95,000 $370,000 $65,000 8 12% $485,000 $485,000 $ 70,000 $27,000 $ 27,000 $ 39,000 $ 44,000 a Required: a. & b. Determine the amount of the annual lease payments as calculated by the lessor and the amount the lessee would record as a right-of-use asset and a lease liability, for each of the above situations. (Round your answers to the nearest whole dollar amount.) Situation 1 Situation 2 Situation 3 Situation 4 Residual Value PV of Lease PV of Residual Right-of-use Lease Payments Guarantee Payments Value Guarantee Asset/Lease Liability $ 20,075 $ 0 $ 70,000 $ 0 $ 70,000 $ 0 $ 336,284 $ 0 $ 336,284 0 $ 77,452 $ 0 $ 77,452 $ 5,000 $ 467,229 $ 2,019 $ 469,248 OOO & | AEAEA EA On June 30, 2021, Georgia-Atlantic, Inc. leased a warehouse equipment from IC Leasing Corporation. The lease agreement calls for Georgia-Atlantic to make semiannual lease payments of $403,067 over a five-year lease term, payable each June 30 and December 31, with the first payment at June 30, 2021. Georgia-Atlantic's incremental borrowing rate is 8%, the same rate IC uses to calculate lease payment amounts. Amortization is recorded on a straight-line basis at the end of each fiscal year. The fair value of the equipment is $3.4 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 present value of the lease payments at June 30, 2021 that Georgia-Atlantic uses to record the right-of-use asset and lease liability. 2. What pretax amounts related to the lease would Georgia-Atlantic report in its balance sheet at December 31, 2021? 3. What pretax amounts related to the lease would Georgia-Atlantic report in its income statement for the year ended December 31, 2021? (For all requirements, enter your answers in whole dollars and not in millions. Round your final answers to the nearest whole dollar.) 1. Present value 2. Pretax amount for liability Pretax amount for right-of-use asset 3 Pretax amount for interest expense Pretax amount for amortization expense