Assume that on December 31, 2019, Kirnberly-clark Corp. signs a 10-year, non-cancelable lease agreement to lease a storage bullding from Sheffleld Storage Company. The following Information pertains to this lease agreement. The agreement requires equal rental payments of $68,199 beginning on December 31, 2019. The fair value of the bullding on December 31, 2019 is $498,399. The butlding has an estimated economic tife of 12 years, a guaranteed residual value of $9,000, and an expected residual value of $4,900. Kimberly-Clark deprectates similar bulldings on the stralght-line method. The lease is nonrenewable. At the termination of the lease, the butlding 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. 3. 4. 5. Click here to vtew factor tables. (For calculation purposes, use s 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 Decembe titles are automatically indented when amaunt is entered. Do not indent manually. Round answers to o decimal places e.g. 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)
Assume that on December 31, 2019, Kirnberly-clark Corp. signs a 10-year, non-cancelable lease agreement to lease a storage bullding from Sheffleld Storage Company. The following Information pertains to this lease agreement. The agreement requires equal rental payments of $68,199 beginning on December 31, 2019. The fair value of the bullding on December 31, 2019 is $498,399. The butlding has an estimated economic tife of 12 years, a guaranteed residual value of $9,000, and an expected residual value of $4,900. Kimberly-Clark deprectates similar bulldings on the stralght-line method. The lease is nonrenewable. At the termination of the lease, the butlding 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. 3. 4. 5. Click here to vtew factor tables. (For calculation purposes, use s 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 Decembe titles are automatically indented when amaunt is entered. Do not indent manually. Round answers to o decimal places e.g. 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)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Assume that on December 31, 2019, Kmberly-clark corp. signs a 10-year, non-cancelable lease agreement to lease a storage bullding from Sheffleld Storage Company. The followIng Information pertalns to this lease agreement.
1.
The agreement requires equal rental payments of $68,199 beginning on December 31, 2019.
The falr value of the bullding on December 31, 2019 Is $498,399.
2.
The bullding has an estimated economlc life of 12 years, a guaranteed residual value of $9,00o, and an expected residual value of $4,900. Klmberty-Clark depreclates simllar bulldings on the stralght-line method.
The lease Is nonrenewable. At the termination of the lease, the bullding reverts to the lessor.
Kimberly-Clark's Incremental bornowing rate Is B% per year. The lessor's Implicit rate Is not known by KImberly-Clark.
3.
4.
5.
Click here to view factor tables, (For caleulation parposes, use 5 decimal places as displayed in the factor table provided.)
Prepare the journal entries on the lessee's books to reflect the slgning 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
bitles are automatically indented when amount is entered. Do not indent manually Round answers to 0 decimal places e.g.5,275.)
Account Titdes and Explanation
Debit
Credit
(To record the lease)
(To record first lease payment)
(To record amortizatlon of the nght-of-use asset)
(To record Interest expense)
(To record amortization of the right-of-use asset)
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