Assume that on December 31, 2019, Kimberly-Clark Corp. signs a 10-year, non-cancelable lease agreement to lease a storage building from Sheffield Storage Company. The following information pertains to this lease agreement. 1. The agreement requires equal rental payments of $66,499 beginning on December 31, 2019. The fair value of the building on December 31, 2019 is $486,311. 2. 3. The building has an estimated economic life of 12 years, a guaranteed residual value of $9,500, and an expected residual value of $7,100. Kimberly-Clark depreciates similar buildings on the straight-line method. 4. The lease is nonrenewable. At the termination of the lease, the building reverts to the lessor. 5. Kimberly-Clark's incremental borrowing rate is 8% per year. The lessor's implicit rate is not known by Kimberly-Clark. Click here to view factor tables. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Prepare the journal entries on the lessee's books to reflect the signing of the lease agreement and to record the payments and expenses related to this lease for the years 2019, 2020, and 2021. Kimberly-Clark's fiscal year-end is December 31. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 0 decimal places e.g. 5,275.) Date Account Titles and Explanation Debit Credit
Assume that on December 31, 2019, Kimberly-Clark Corp. signs a 10-year, non-cancelable lease agreement to lease a storage building from Sheffield Storage Company. The following information pertains to this lease agreement. 1. The agreement requires equal rental payments of $66,499 beginning on December 31, 2019. The fair value of the building on December 31, 2019 is $486,311. 2. 3. The building has an estimated economic life of 12 years, a guaranteed residual value of $9,500, and an expected residual value of $7,100. Kimberly-Clark depreciates similar buildings on the straight-line method. 4. The lease is nonrenewable. At the termination of the lease, the building reverts to the lessor. 5. Kimberly-Clark's incremental borrowing rate is 8% per year. The lessor's implicit rate is not known by Kimberly-Clark. Click here to view factor tables. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Prepare the journal entries on the lessee's books to reflect the signing of the lease agreement and to record the payments and expenses related to this lease for the years 2019, 2020, and 2021. Kimberly-Clark's fiscal year-end is December 31. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 0 decimal places e.g. 5,275.) Date Account Titles and Explanation Debit Credit
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Assume that on December 31, 2019, Kimberly-Clark Corp. signs a 10-year, non-cancelable lease agreement to lease a storage
building from Sheffield Storage Company. The following information pertains to this lease agreement.
1.
The agreement requires equal rental payments of S66,499 beginning on December 31, 2019.
2.
The fair value of the building on December 31, 2019 is $486,311.
3.
The building has an estimated economic life of 12 years, a guaranteed residual value of $9.500, and an expected residual
value of $7.100. Kimberly-Clark depreciates similar buildings on the straight-line method.
4.
The lease is nonrenewable. At the termination of the lease, the building reverts to the lessor.
Kimberly-Clark's incremental borrowing rate is 8% per year. The lessor's implicit rate is not known by Kimberly-Clark.
5.
Click here to viewfactor tables. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.)
Prepare the journal entries on the lessee's books to reflect the signing of the lease agreement and to record the payments and
expenses related to this lease for the years 2019. 2020, and 2021. Kimberly-Clark's fiscal year-end is December 31 (Credit
account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 0O decimal places eg.
5,275.)
Date
Account Titles and Explanation
Debit
Credit
(To record the lease)
(To record first lease payment)
(To record amortization of the right-of-use asset)
(To record interest expense)
(To record amortization of the right-of-use asset)
(To record interest expense)
>
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