Question

Exercise 21A-4 a-d Assume that on December 31, 2016, 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 $68,399 beginning on December 31, 2016 The fair value of the building on December 31, 2016 is $499,848 The building has an estimated economic life of 12 years, a guaranteed residual value of $9,000, and an expected residual value of $4,700. Kimberly-Clark depreciates similar buildings on the straight-line 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. 1. 2. 3. 4. 5. Click here to view the factor table. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) 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 2016, 2017, and 2018. Kimberly-Clark's 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.) Date Account Titles and Explanation Debit Credit 12/31/16 (To record the lease) (To record first lease payment) 12/31/17 (To record amortization of the right-of-use asset) (To record interest expense)
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Answer 1