Assume that on December 31, 2024, Kimberly-Clark Corp. signs a 10-year, non-cancelable lease agreement to lease a storage building from Blossom Storage Company. The following information pertains to this lease agreement. 1. 2. 3. 4. 5. The agreement requires equal rental payments of $67,199 beginning on December 31, 2024. The fair value of the building on December 31, 2024, is $491,847. The building has an estimated economic life of 12 years, a guaranteed residual value of $10,500, and an expected residual value of $7,400. Kimberly-Clark depreciates similar buildings on the straight-line method. 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.
Assume that on December 31, 2024, Kimberly-Clark Corp. signs a 10-year, non-cancelable lease agreement to lease a storage building from Blossom Storage Company. The following information pertains to this lease agreement. 1. 2. 3. 4. 5. The agreement requires equal rental payments of $67,199 beginning on December 31, 2024. The fair value of the building on December 31, 2024, is $491,847. The building has an estimated economic life of 12 years, a guaranteed residual value of $10,500, and an expected residual value of $7,400. Kimberly-Clark depreciates similar buildings on the straight-line method. 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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
218.
Subject : - Accounting
![(a)
Your answer is partially correct.
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 2024, 2025, and 2026. Kimberly-Clark's fiscal year-end is December 31. (List all debit
entries before credit entries. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is
required, select "No Entry" for the account titles and enter O for the amounts. Round answers to O decimal places e.g. 5,275.)
Date
12/31/24
12/31/24
12/31/25
12/31/25
12/31/26
12/31/26
Account Titles and Explanation
Right-of-Use Asset
Lease Liability
(To record the lease)
Lease Liability
Cash
(To record first lease payment)
Amortization Expense
Right-of-Use Asset
(To record amortization of the right-of-use asset)
Lease Liability
Interest Expense
Cash
(To record interest expense)
Amortization Expense
Right-of-Use Asset
(To record amortization of the right-of-use asset)
Lease Liability
Interest Expense
Cash
(To record interest expense)
Debit
491847
67199
00] 10 100
Credit](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fd7b6ce77-7d1f-42c7-90fc-6e082dc1db1b%2F8fc0525e-486a-4c24-9176-b082ba19e211%2Frrfispc_processed.png&w=3840&q=75)
Transcribed Image Text:(a)
Your answer is partially correct.
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 2024, 2025, and 2026. Kimberly-Clark's fiscal year-end is December 31. (List all debit
entries before credit entries. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is
required, select "No Entry" for the account titles and enter O for the amounts. Round answers to O decimal places e.g. 5,275.)
Date
12/31/24
12/31/24
12/31/25
12/31/25
12/31/26
12/31/26
Account Titles and Explanation
Right-of-Use Asset
Lease Liability
(To record the lease)
Lease Liability
Cash
(To record first lease payment)
Amortization Expense
Right-of-Use Asset
(To record amortization of the right-of-use asset)
Lease Liability
Interest Expense
Cash
(To record interest expense)
Amortization Expense
Right-of-Use Asset
(To record amortization of the right-of-use asset)
Lease Liability
Interest Expense
Cash
(To record interest expense)
Debit
491847
67199
00] 10 100
Credit
Transcribed Image Text:Assume that on December 31, 2024, Kimberly-Clark Corp. signs a 10-year, non-cancelable lease agreement to lease a storage
building from Blossom Storage Company. The following information pertains to this lease agreement.
1.
2.
3.
4.
5.
The agreement requires equal rental payments of $67,199 beginning on December 31, 2024.
The fair value of the building on December 31, 2024, is $491,847.
The building has an estimated economic life of 12 years, a guaranteed residual value of $10,500, and an expected residual
value of $7,400. Kimberly-Clark depreciates similar buildings on the straight-line method.
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.
Click here to view factor tables.
(For calculation purposes, use 5 decimal places as displayed in the factor table provided.)
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 2 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education