Question
Assume that on December 31, 2021, Stora Enso (FIN) signs a 10-year, non-cancelable lease agreement to lease a storage building from Sheffield Storage. The following
Assume that on December 31, 2021, Stora Enso (FIN) signs a 10-year, non-cancelable lease agreement to lease a storage building from Sheffield Storage. The following information pertains to this lease agreement. 1. The agreement requires equal rental payments of 66,599 beginning on December 31, 2021. 2. The fair value of the building on December 31, 2021 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. Stora Enso depreciates similar buildings using the straight-line method. 4. The lease is non-renewable. At the termination of the lease, the building reverts to the lessor. 5. Stora Ensos incremental borrowing rate is 8% per year. The lessors implicit rate is not known by Stora Enso.
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 2021, 2022, and 2023. Stora Ensos 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.)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started