Assume that on Jan 1, 2017. kimberly clark corp. sign a 10-year noncancelable lease agreement to lease a storage bilding

1 E21-3 (LO2.4) Lessee Entries, Capital Lease with Executory Costs and Unguaranteed Residual 2 Value 3 Assume that on January 1, 2017, Kimberly-Clark Corp. signs a 10-year noncancelable lease agreement to lease a storage building from Sheffield Storage Company. The following information pertains to this lease agreement Equal rental payments, as required in the lease agreement, beginning on January 1, 2017 $ 72,000 2. Fair value of the building on January 1, 2017 $ 440,000 3. 12 Estimated economic life of the building in years Unguaranteed residual value of the building Kimberly-Clark depreciates similar buildings on the straight-line method. 10,000 The lease is nonrenewable. At the termination of the lease, the building roverts to the lessor. 5. Kimberly-Clark's annual incremental borrowing rate Lessor's implicit rate is not known by Kimberly-Clark 2,471 Amount of executory costs included in the yearly rental payment Executory costs relate to taxes on the property 25 Instructions: 26 Calculate the Present value of the lease payments and prepare a lease amortization table and the 27 journal entries on the lessee's books to reflect the signing of the leas 28 payments and expenses related to this lease for the years 2017 and 2018, Kimberly-Clark's corporate Capitalized amount of the lease: "resent value of minimum lease payments using Excel's PV function: Base Amortization Schedule Annual Payment Reduction Less Executory Lease Date Costs Interest Llability Lease Llability Credit Debit 440,000 1/1/17 Leased Building lease liability 440,000 1/1/17 Executory cost lease liability cash 2,471 69,529 720,000 1 12/31/17 Depreciation expense Accumulated Dep 44,000 44,000 12/31/17 44,456 interest expense interest payable 11 IT TL TI 1/1/18 11 - Executory cost lease liability interest pay abalo cash 2.471 25.073 44,456 BE 72,000