Assume that on December 31, 2024, Kimberly-Clark Corp. signs a 10-year, non-cancelable lease agreement to lease a storage building from Cullumber Storage Company. The following information pertains to this lease agreement. 1. 2. 3. 4. 5. The agreement requires equal rental payments of $68,499 beginning on December 31, 2024 The fair value of the building on December 31, 2024, is $501,036, The building has an estimated economic life of 12 years, a guaranteed residual value of $10,000, and an expected residual value of $5,600, 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.) (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
Assume that on December 31, 2024, Kimberly-Clark Corp. signs a 10-year, non-cancelable lease agreement to lease a storage building from Cullumber Storage Company. The following information pertains to this lease agreement. 1. 2. 3. 4. 5. The agreement requires equal rental payments of $68,499 beginning on December 31, 2024 The fair value of the building on December 31, 2024, is $501,036, The building has an estimated economic life of 12 years, a guaranteed residual value of $10,000, and an expected residual value of $5,600, 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.) (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
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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 Cullumber Storage Company. The following information pertains to this lease agreement.
The agreement requires equal rental payments of $68,499 beginning on December 31, 2024.
The fair value of the building on December 31, 2024, is $501,036,
The building has an estimated economic life of 12 years, a guaranteed residual value of $10,000, and an expected residual
value of $5,600. 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.
5. Kimberly-Clark's incremental borrowing rate is 8% per year. The lessor's implicit rate is not known by Kimberly-Clark.
1.
2.
3.
4.
Click here to view factor tables.
(For calculation purposes, use 5 decimal places as displayed in the factor table provided.)
(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 0 for the amounts. Round answers to 0
decimal places e.g. 5,275.)
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