80.2K

Verified Solution

Link Copied!

Assume that on December $31,2024,$ Kimberly$-$Clark Corp. signs a $10-$year, non$-$cancelable lease agreement to lease a storage Assume that on December $31,2024,$ Kimberly$-$Clark Corp. signs a $10-$year, non$-$cancelable lease agreement to lease a storage

building from Oriole Storage Company. The following information pertains to this lease agreement.

The agreement requires equal rental payments of $$67,599$ beginning on December $31,2024.$

The fair value of the building on December $31,2024,$ is $$494,051.$

The building has an estimated economic life of $12$ years, a guaranteed residual value of $$9,000,$ and an expected residual

value of $$5,500.$ 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.

Click here to view factor tables.

$($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 $2024,2025,$ and $2026.$ Kimberly$-$Clark's fiscal year$-$end is December $31.($List all debit

entries before credit entries. Credit account titles are automatically indented when amount is entered. Do not indent

manually. If no entry is required, select $"$No Entry" for the account titles and enter $0$ for the amounts. Round answers to $0$

decimal places e$.$g$.5,275.)$

$($To record the lease$)$

$($To record first lease payment$)($To record interest expense$)$

$($To record amortization of the right$-$of$-$use asset$)$

Interest Expense

$1|$

$($To record amortization of the right$-$of$-$use asset$)$

J

$1$

$($To record interest expense$)$

eTextbook and Media

List of Accounts

building from Oriole Storage Company. The following information pertains to this lease agreement.

$1.$

$2.$

$3.$

$4.$

$5.$

The agreement requires equal rental payments of $$67,599$ beginning on December $31,2024.$

The fair value of the building on December $31,2024,$ is $$494,051.$

The building has an estimated economic life of $12$ years, a guaranteed residual value of $$9,000,$ and an expected residual

value of $$5,500.$ 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.

Show all imagesShow all images

Answer & Explanation Solved by verified expert

See Answer