Homework Answers
| Required 1 : |
| This is a Finance Lease |
| Explanation : |
| This is a Finance Lease Because The lease term (5 Year) is greater than |
| 75 % of Economic life ( 6 years ) at the leased asset. |
| Hence, The lease term is 83.33 % (5/6 years ) of the asset's Economic life. |
| Required 2 : |
| Present value of the lease payments = $ 35,694 (rounded ) |
| Explanation : |
| Present value of the lease payments = $ 8,560* 4.16987 |
| Present value of the lease payments = $ 35,694 (rounded ) |
| Present value of annuity due of $ 1 for 5 periods at 10 % is 4.16987 |
| Required 3 : | |||
| Date | Account Titles and Explanation | Debit | Credit |
| December 31,2019 | Right of use asset | $ 35,694 | |
| Lease Liability | $ 35,694 | ||
| (To record the lease ) | |||
| December 31,2019 | Lease Liability | $ 8,560 | |
| Cash | $ 8,560 | ||
| (To record first lease payment ) | |||
| December 31,2020 | Amortization Expense ($35,694/5 years) | $ 7139 | |
| Right of use asset | $ 7139 | ||
| (To record amortization of the right of use asset ) | |||
| December 31,2020 | Interest Expense {(35,694-8560)*10 %} | $ 2,713 | |
| Lease Liability {$ 8,560- $ 2,713 } | $ 5,847 | ||
| Cash | $ 8,560 | ||
| (To record Interest Expense) | |||
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1.
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3.
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guaranteed residual value of $10,500, and an expected residual
value...
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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 $67,299
beginning on December 31, 2019.
2.
The fair value of the building on December 31, 2019 is
$492,571.
3.
The building has an estimated economic life of 12 years, a
guaranteed residual value of $10,500, and an expected residual
value...
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