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-Clarks incremental borrowing rate is 8% per year. The lessors implicit rate is not known by Kimberly-Clark.

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(a)

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Prepare the journal entries on the lessees 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-Clarks 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 e.g. 5,275.)

Date	Account Titles and Explanation	Debit	Credit
12/31/1912/31/2012/31/21	enter an account title To record the lease on December 31 2019	enter a debit amount	enter a credit amount
	enter an account title To record the lease on December 31 2019	enter a debit amount	enter a credit amount
	(To record the lease)
12/31/1912/31/2012/31/21	enter an account title To record first lease payment on December 31 2019	enter a debit amount	enter a credit amount
	enter an account title To record first lease payment on December 31 2019	enter a debit amount	enter a credit amount
	(To record first lease payment)
12/31/1912/31/2012/31/21	enter an account title To record amortization of the right-of-use asset on December 31 2020	enter a debit amount	enter a credit amount
	enter an account title To record amortization of the right-of-use asset on December 31 2020	enter a debit amount	enter a credit amount
	(To record amortization of the right-of-use asset)
12/31/1912/31/2012/31/21	enter an account title To record interest expense on December 31 2020	enter a debit amount	enter a credit amount
	enter an account title To record interest expense on December 31 2020	enter a debit amount	enter a credit amount
	enter an account title To record interest expense on December 31 2020	enter a debit amount	enter a credit amount
	(To record interest expense)
12/31/1912/31/2012/31/21	enter an account title To record amortization of the right-of-use asset on December 31 2021	enter a debit amount	enter a credit amount
	enter an account title To record amortization of the right-of-use asset on December 31 2021	enter a debit amount	enter a credit amount
	(To record amortization of the right-of-use asset)
12/31/1912/31/2012/31/21	enter an account title To record interest expense on December 31 2021	enter a debit amount	enter a credit amount
	enter an account title To record interest expense on December 31 2021	enter a debit amount	enter a credit amount
	enter an account title To record interest expense on December 31 2021	enter a debit amount	enter a credit amount
	(To record interest expense)

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