Answer:
1. $3,799,988
2. $3,419,989
Explanation:
1. Semiannual lease payment = $468,683
Total semiannual payments = 5*2 = 10
Incremental borrowing rate = 10%, 5% semiannual
Present value of minimum lease payments used to record right to use assets = Semi Annual lease payments * Cumulative PV Factor of annuity due for 10 periods at 5%
= $468,683 * 8.1078 = $3,799,988.0274 ≈ $3,799,988
2. Semiannual payment on 30.06.2021 = $468,683
Pretax amount of liability on 30.06.2021 = ($ 3,799,988.0274 - $468,683) = $3,331,305.0274
Interest expense for 31.12.2021 = $3,331,305.0274 * 5% = $166,565.25137
Semiannual lease payment on 31.12.2021 = $468,683
Pre tax amount for liability December 31, 2021 = $3,331,305.0274 + $166,565.25137 - $468,683 = $3,029,187.2788
Depreciation on right to use assets for 2021 = ($3,799,988.0274 ÷ 5) * (5/10)= $379,998.80274
Pre tax amount of right to use asset to be reported for 2021 = $3,799,988.0274 - $379,998.80274 = $3,419,989.2247 ≈ $3,419,989
