Problem
On June 30, 2016, Georgia-Atlantic, Inc., leased a warehouse facility from IC Leasing Corporation. The lease agreement calls for Georgia-Atlantic to make semiannual lease payments of $779, 224 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 9%, the same rate IC used to calculate lease payment amounts. IC purchased the warehouse from Builders, Inc. at a cost of $4.2 million. (FV of $1. PV of $1. FVA of $1. PVA of $1. FVAD of $1 and PVAD of $1)
Required:
1. What pretax amounts related to the lease would IC report in its balance sheet at December 31, 2016?
2. What pretax amounts related to the lease would IC report in its income statement for the year ended December 31, 2016?