Exercise 21-04 (Part Level Submission) 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 $71,830 beginning on December 31, 2019. 2. The fair value of the building on December 31, 2019 is $525,176. 3. The building has an estimated economic life of 12 years, a guaranteed residual value of $10,000, and an expected residual value of $7,000. 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 vien factor tables. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) (a) 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 eg. 5,275.) Date Account Titles and Explanation Debit Credit 12/31/19 v Right-of-Use Asset 525176 Lease Liability (To record the lease) 525176 12/31/19 v Lease Liability 71830 Cash 71830 (To record first lease payment)
Exercise 21-04 (Part Level Submission) 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 $71,830 beginning on December 31, 2019. 2. The fair value of the building on December 31, 2019 is $525,176. 3. The building has an estimated economic life of 12 years, a guaranteed residual value of $10,000, and an expected residual value of $7,000. 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 vien factor tables. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) (a) 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 eg. 5,275.) Date Account Titles and Explanation Debit Credit 12/31/19 v Right-of-Use Asset 525176 Lease Liability (To record the lease) 525176 12/31/19 v Lease Liability 71830 Cash 71830 (To record first lease payment)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:12/31/19 v Right-of-Use Asset
525176
Lease Liability
525176
(To record the lease)
12/31/19 v Lease Liability
71830
Cash
71830
(To record first lease payment)
12/31/20
Amortization Expense
Right-of-Use Asset
(To record amortization of the right-of-use asset)
|12/31/20
Interest Expense
Lease Liability
Cash
71830
(To record interest expense)
12/31/20 •
Amortization Expense
Right-of-Use Asset
(To record amortization of the right-of-use asset)
12/31/21 v
Transcribed Image Text:Exercise 21-04 (Part Level Submission)
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 $71,830 beginning on December 31, 2019.
2. The fair value of the building on December 31, 2019 is $525,176.
3. The building has an estimated economic life of 12 years, a guaranteed residual value of $10,000, and an expected residual value of $7,000. 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.)
v (a)
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 eg. 5,275.)
Date
Account Titles and Explanation
Debit
Credit
12/31/19 v Right-of-Use Asset
525176
Lease Liability
525176
(To record the lease)
12/31/19 v Lease Liability
71830
Cash
71830
(To record first lease payment)
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