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 Clarks incremental borrowing rate is 8 per year The lessors implicit rate is not known by Kimberly Clark 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 e g 5,275 ) Date Account Titles and Explanation Debit Credit (To record the lease) (To record first lease payment) (To record amortization of the right of use asset) (To record interest expense) (To record amortization of the right of use asset) (To record interest expense)

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Jul 23, 2024

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

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

image text in transcribed

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 e.g. 5,275.) Date Account Titles and Explanation Debit Credit (To record the lease) (To record first lease payment) (To record amortization of the right-of-use asset) (To record interest expense) (To record amortization of the right-of-use asset) (To record interest expense)