E21-4 (L02,4) EXCEL (Lessec Entries; Finance Lease and Unguaranteed Residual Vale Assume that on December 31 2016, Kimberly-Clark Corp. signs a 10-year, non-cancelable lease agreement to lease a storage building from Sheffield Stornge Company. The following information pertains to this lease agreement. 1. The agreement requires cqual rental payments of S71,830 beginning on December 31, 2016. The fair value of the building on December 31, 2016, is 5525,176 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 depreciat 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-Clark's incremental borrowing rate is 8 per year. The lessor's implicit rate is not known by Kimberly-Clark Instructions (a) Prepane the journal entries on the lessee's books to reflect the signing of the lease agrement and to record the payments and expenses related lo this lease for the years 2016, 2017, and 2018. Kimberly-Clark's fiscal year-end is Ducember 31 Suppose the same facts as above, except that Kimberly-Clark incurred legal fees resulting from the execution of the lease of S5,000, and received a lease incentive from Sheffield to enter the lease of $1,000. How would the initial measure ment of the lease liability and right-of-use asset be affected under this situntion? uppose that in addition to the S71,830 annual rental payments, Kimberly-Clark is also required to pay S5,000 for insur- ance costs cach year on the building directly to the lessor, Sheffield Storage. How would this cxecutory cost affect the initial measurement of the lease liability and right-of-use asset? (c) S (d) Return lo the original facts in the problem.Now suppose that, at the end of the lease lerm, Kimberly-Clark took good care of the asset and Sheffield agrees lhat lhe fair value of lhe asset is actually so,000. Record the entry for Kimberly- at the end of the lease to return control of the storage building lo Shefficld (assuming the accrual of interest on the lease liability has already been made)