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Determine the price at which builders is selling

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Reference no: EM133520913

Question: On June 30, 2024, Georgia-Atlantic, Incorporated leased warehouse equipment from Builders, Incorporated 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 on June 30, 2024. 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.

Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)

Required:

  • Determine the price at which Builders is "selling" the equipment (present value of the lease payments) on June 30, 2024.
  • What amount related to the lease would Builders report in its balance sheet on December 31, 2024 (ignore taxes)?
  • What line item amounts related to the lease would Builders report in its income statement for the year ended December 31, 2024 (ignore taxes)?

 

Reference no: EM133520913

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