E$20\mathrm{.}4($LO $2,4)$ A textbox reads, Excel. $($Lessee Entries; Finance Lease and Unguaranteed Residual Value$)$ Assume that on December $31,2024,$ 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.

The agreement requires equal rental payments of $$71,830$ beginning on December $31,2024.$

The fair value of the building on December $31,2024,$ is $$525,176.$

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 straightline method.

The lease is nonrenewable. At the termination of the lease, the building reverts to the lessor.

Kimberly$-$Clark$$s incremental borrowing rate is $8\%$ per year. The lessor$$s implicit rate is not known by Kimberly$-$Clark.

Instructions

Prepare the journal entries on the lessee$$s books to reflect the signing of the lease agreement and to record the payments and expenses related to this lease for the years $2024,2025,$ and $2026.$ Kimberly$-$Clark$$s fiscal year$-$end is December $31.$

Suppose the same facts as above, except that Kimberly$-$Clark incurred legal fees resulting from the execution of the lease of $$5,000,$ and received a lease incentive from Sheffield to enter the lease of $$1,000.$ How would the initial measurement of the lease liability and right$-$of$-$use asset be affected under this situation?

Suppose that in addition to the $$71,830$ annual rental payments, Kimberly$-$Clark is also required to pay $$5,000$ for insurance costs each year on the building directly to the lessor, Sheffield Storage. How would this executory cost affect the initial measurement of the lease liability and right$-$of$-$use asset?

Return to the original facts in the problem. Now suppose that, at the end of the lease term, Kimberly$-$Clark took good care of the asset and Sheffield agrees that the fair value of the asset is actually $$10,000.$ Record the entry for Kimberly$-$Clark at the end of the lease to return control of the storage building to Sheffield $($assuming the accrual of interest on the lease liability has already been made$).$

Please assist with journale entries where if payment isnt made on $12/31$ each year but on $1/1.$ whether it would be lease payable.