Assume that on December 31, 2016, 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 $67,799 beginning on December 31, 2016.

2. The fair value of the building on December 31, 2016 is $496,890.

3. The building has an estimated economic life of 12 years, a guaranteed residual value of $12,000, and an expected residual value of $8,300. 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-Clarks incremental borrowing rate is 8% per year. The lessors implicit rate is not known by Kimberly-Clark.

12/13/16 (To record the lease)

12/13/17 (To record amortization of the right of use asset)

12/13/17 (To record interest expense)

12/13/18 (To record amortization of the right of use asset)

12/13/18 (To record interest expense)