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 $66,299 beginning on December 31, 2019. 2. The fair value of the building on December 31, 2019 is $486,019. 3. The building has an estimated economic life of 12 years, a guaranteed residual value of $12,000, and an expected residual value of $9,800. Kimberly-Clark depreciates 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. Click here to view factor tables. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) (a) Your Answer Correct Answer Partially correct answer iconYour answer is partially correct. 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 2019, 2020, and 2021. 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 enter an account title To record the lease on December 31 2019 enter a debit amount enter a credit amount enter an account title To record the lease on December 31 2019 enter a debit amount enter a credit amount (To record the lease) enter an account title To record first lease payment on December 31 2019 enter a debit amount enter a credit amount enter an account title To record first lease payment on December 31 2019 enter a debit amount enter a credit amount (To record first lease payment) enter an account title To record amortization of the right-of-use asset on December 31 2020 enter a debit amount enter a credit amount enter an account title To record amortization of the right-of-use asset on December 31 2020 enter a debit amount enter a credit amount (To record amortization of the right-of-use asset) enter an account title To record interest expense on December 31 2020 enter a debit amount enter a credit amount enter an account title To record interest expense on December 31 2020 enter a debit amount enter a credit amount enter an account title To record interest expense on December 31 2020 enter a debit amount enter a credit amount (To record interest expense) enter an account title To record amortization of the right-of-use asset on December 31 2021 enter a debit amount enter a credit amount enter an account title To record amortization of the right-of-use asset on December 31 2021 enter a debit amount enter a credit amount (To record amortization of the right-of-use asset) enter an account title To record interest expense on December 31 2021 enter a debit amount enter a credit amount enter an account title To record interest expense on December 31 2021 enter a debit amount enter a credit amount enter an account title To record interest expense on December 31 2021 enter a debit amount enter a credit amount (To record interest expense) eTextbook and Media Solution List of Accounts Attempts: 3 of 3 used (b) 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? Right-of-use asset $enter the Right-of-use asset in dollars

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 $66,299 beginning on December 31, 2019. 2. The fair value of the building on December 31, 2019 is $486,019. 3. The building has an estimated economic life of 12 years, a guaranteed residual value of $12,000, and an expected residual value of $9,800. Kimberly-Clark depreciates 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. Click here to view factor tables. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) (a) Your Answer Correct Answer Partially correct answer iconYour answer is partially correct. 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 2019, 2020, and 2021. 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 enter an account title To record the lease on December 31 2019 enter a debit amount enter a credit amount enter an account title To record the lease on December 31 2019 enter a debit amount enter a credit amount (To record the lease) enter an account title To record first lease payment on December 31 2019 enter a debit amount enter a credit amount enter an account title To record first lease payment on December 31 2019 enter a debit amount enter a credit amount (To record first lease payment) enter an account title To record amortization of the right-of-use asset on December 31 2020 enter a debit amount enter a credit amount enter an account title To record amortization of the right-of-use asset on December 31 2020 enter a debit amount enter a credit amount (To record amortization of the right-of-use asset) enter an account title To record interest expense on December 31 2020 enter a debit amount enter a credit amount enter an account title To record interest expense on December 31 2020 enter a debit amount enter a credit amount enter an account title To record interest expense on December 31 2020 enter a debit amount enter a credit amount (To record interest expense) enter an account title To record amortization of the right-of-use asset on December 31 2021 enter a debit amount enter a credit amount enter an account title To record amortization of the right-of-use asset on December 31 2021 enter a debit amount enter a credit amount (To record amortization of the right-of-use asset) enter an account title To record interest expense on December 31 2021 enter a debit amount enter a credit amount enter an account title To record interest expense on December 31 2021 enter a debit amount enter a credit amount enter an account title To record interest expense on December 31 2021 enter a debit amount enter a credit amount (To record interest expense) eTextbook and Media Solution List of Accounts Attempts: 3 of 3 used (b) 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? Right-of-use asset $enter the Right-of-use asset in dollars

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter20: Accounting For Leases

Section: Chapter Questions

Problem 1E: Determining Type of Lease and Subsequent Accounting On January 1, 2019, Caswell Company signs a...

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(a)

Your Answer
Correct Answer

Partially correct answer iconYour answer is partially correct.

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 2019, 2020, and 2021. 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

enter an account title To record the lease on December 31 2019

enter a debit amount

enter a credit amount

enter an account title To record the lease on December 31 2019

enter a debit amount

enter a credit amount

(To record the lease)

enter an account title To record first lease payment on December 31 2019

enter a debit amount

enter a credit amount

enter an account title To record first lease payment on December 31 2019

enter a debit amount

enter a credit amount

(To record first lease payment)

enter an account title To record amortization of the right-of-use asset on December 31 2020

enter a debit amount

enter a credit amount

enter an account title To record amortization of the right-of-use asset on December 31 2020

enter a debit amount

enter a credit amount

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

enter an account title To record interest expense on December 31 2020

enter a debit amount

enter a credit amount

enter an account title To record interest expense on December 31 2020

enter a debit amount

enter a credit amount

enter an account title To record interest expense on December 31 2020

enter a debit amount

enter a credit amount

(To record interest expense)

enter an account title To record amortization of the right-of-use asset on December 31 2021

enter a debit amount

enter a credit amount

enter an account title To record amortization of the right-of-use asset on December 31 2021

enter a debit amount

enter a credit amount

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

enter an account title To record interest expense on December 31 2021

enter a debit amount

enter a credit amount

enter an account title To record interest expense on December 31 2021

enter a debit amount

enter a credit amount

enter an account title To record interest expense on December 31 2021

enter a debit amount

enter a credit amount

(To record interest expense)

eTextbook and Media

Solution

List of Accounts

Attempts: 3 of 3 used

(b)

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?

Right-of-use asset

$enter the Right-of-use asset in dollars

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1.		The agreement requires equal rental payments of $66,299 beginning on December 31, 2019.
2.		The fair value of the building on December 31, 2019 is $486,019.
3.		The building has an estimated economic life of 12 years, a guaranteed residual value of $12,000, and an expected residual value of $9,800. Kimberly-Clark depreciates 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.