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 $66,599 beginning on December 31, 2019. 2. The fair value of the building on December 31, 2019 is $487,267. 3. The building has an estimated economic life of 12 years, a guaranteed residual value of $10,000, and an expected residual value of $7,500. 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 implicitrate 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 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 decimal places eg. 5,275) Date Account Titles and Explanation Debit Credit 483886 Right-of-Use Asset 12/31/19 483886 Lease Liability (To record the lease) 66599 12/31/19 Lease Liability 66599 Cash (To record first lease payment) Amortization Expense 48.389 12/31/20 48.389 Right-of-Use Asset (To record amortization of the right-of-use asset) Lease Liability 33216 12/31/20 12/31/19 Lease Liability 66599 Cash (To record first lease payment) Amortization Expense 48389 12/31/20 48389 Right of-Use Asset (To record amortization of the right-of-use asset) Lease Liability 33216 12/31/20 Interest Expense 33383 66599 Cash (To record interest expense) 12/31/21 48389 Amortization Expense 48389 Right of Use Asset (To record amortization of the right-of-use asset) 35873 Lease Liability 30726 Interest Expense 66599 Cash (To record interest expense) (b) The parts of this question must be completed in order. This part will be available when you complete the part above. (c) The parts of this question must be completed in order. This part will be available when you complete the part above. (d) The parts of this question must be completed in order. This part will be available when you complete the part above
