Direct financing lease; lessor; balance sheet and income statement effects
Response to the following 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 $562,907 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 10%, the same rate IC used to calculate lease payment amounts. IC purchased the warehouse from Builders, Inc. at a cost of $3 million.
Required:
1. What amounts related to the lease would IC report in its balance sheet at December 31, 2016 (ignore taxes)?
2. What amounts related to the lease would IC report in its income statement for the year ended December 31, 2016 (ignore taxes)?