Assume that on December 31, 2024, Kimberly-Clark Corp. signs a 10-year, non-cancelable lease agreement to lease a storage building from Cullumber Storage Company. The following information pertains to this lease agreement. 1. 2. 3. 4. 5. The agreement requires equal rental payments of $67,399 beginning on December 31, 2024. The fair value of the building on December 31, 2024, is $492,833. The building has an estimated economic life of 12 years, a guaranteed residual value of $9,500, and an expected residual value of $6,200. 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.)

Assume that on December 31, 2024, Kimberly-Clark Corp. signs a 10-year, non-cancelable lease agreement to lease a storage building from Cullumber Storage Company. The following information pertains to this lease agreement. 1. 2. 3. 4. 5. The agreement requires equal rental payments of $67,399 beginning on December 31, 2024. The fair value of the building on December 31, 2024, is $492,833. The building has an estimated economic life of 12 years, a guaranteed residual value of $9,500, and an expected residual value of $6,200. 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.)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

3. On January 1, 2022, Verlander Corp. signs a 5-year noncancelable lease agreement to lease a backhoe from Scherzer Equipment, Inc. The following information pertains to this lease agreement. 1. The agreement requires equal rental payments of $3,310 beginning on January 1, 2022. 2. The fair value of the backhoe on January 1, 2022, is $14,000. 3. The backhoe has an estimated economic life of 6 years, with an unguaranteed residual value of $1,500. Verlander depreciates similar equipment using the straight-line method. 4. The lease is nonrenewable. At the termination of the lease, the backhoe reverts to the lessor. 5. Verlander's incremental borrowing rate is 12% per year. The lessor's implicit rate is 9% and is not known by Verlander. 6. The yearly rental payment includes $450 of executory costs related to insurance on the backhoe. 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…
On January 1, 2021, Winn Heat Transfer leased office space under a three-year lease agreement. The arrangement specified three annual rent payments of $80,000 each, beginning January 1, 2021, the inception of the lease, and at each January 1 through 2023. Winn also paid a $96,000 advance payment at the inception of the lease in addition to the first $80,000 rent payment. With permission of the owner, Winn made structural modifications to the building before occupying the space at a cost of $180,000. The useful life of the building and the structural modifications were estimated to be 30 years with no residual value. The implicit rate of the lease is 8% per annum, which is also Winn’s incremental borrowing rate. Required: Prepare the appropriate entries for Winn Heat Transfer from the inception of the lease through the end of 2021. Winn’s financial year is the calendar year. Winn uses straight-line depreciation.
On January 1, 2020, an entity leased a machinery with the following data: Annual rental payable at the end of each year for P80,000 with a lease term for 6 years and with an implicit rate of 7%. On January 1, 2023, the entity and the lessor agreed to amend the original terms of the lease by reducing the lease payment to P70,000 and increasing the implicit rate to 9%. Compute for the interest expense to be recognize on January 1, 2023. 15,947 18,968 14,696
Federated Fabrications leased a tooling machine on January 1, 2024, for a three-year period ending December 31, 2026 • The lease agreement specified annual payments of $47,000 beginning with the first payment at the beginning of the lease, and each December 31 through 2025. The company had the option to purchase the machine on December 30, 2026, for $56,000 when its fair value was expected to be $71,000, a sufficient difference that exercise seems reasonably certain. • The machine's estimated useful life was six years with no salvage value. Federated was aware that the lessor's implicit rate of return was 12%. Note: Use tables, Excel, or a financial calculator. (FV of $1. PV of $1. EVA of $1. PVA of $1. EVAD of $1 and PVAD of $1) Required: 1. Calculate the amount Federated should record as a right-of-use asset and lease liability for this finance lease. 2. Prepare an amortization schedule that describes the pattern of interest expense for Federated over the lease term. 3. Prepare the…
Assume that on December 31, 2024, Kimberly-Clark Corp. signs a 10-year, non-cancelable lease agreement to lease a storage building from Sandhill Storage Company. The following information pertains to this lease agreement. 1. The agreement requires equal rental payments of $66.999 beginning on December 31, 2024. 2. The fair value of the building on December 31, 2024, is $490,629. 3. 4. 5. The building has an estimated economic life of 12 years, a guaranteed residual value of $11,000, and an expected residual value of $8,100. 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) (a) Your answer is partially correct. Prepare the journal…
Leewin Brokerage enters into a lease agreement with Bumble Motors to lease an automobile with a fair value of $78,000 under a 5-year lease on December 20, 2022. The lease commences on January 1, 2023, and Leewin will return the automobile to Bumble on December 31, 2027. The automobile has an estimated useful life of 7 years. Leewin made a lease payment of $10,700 on December 20, 2022. In addition, the lease agreement stipulates annual payments of $10,700, due on January 1 of 2023, 2024, 2025, 2026, and 2027. The implicit rate of the lease is 4% and is known by Leewin. There is no purchase option, no lease incentives, no residual value guarantees, and no transfer of ownership. Leewin incurs initial direct costs of $2000.Assuming that this is classified as an operating lease, how much interest expense is recorded in 2023? Group of answer choices $1554 $2140 $0 $1982
Glaus Leasing Company agrees to lease equipment to Jensen Corporation on January 1, 2020. The following information relates to the lease agreement. 1. The term of the lease is 7 years with no renewal option, and the machinery has an estimated economic life of 9 years. 2. The cost of the machinery is $525,000, and the fair value of the asset on January 1, 2020, is $700,000. 3. At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $50,000. Jensen estimates that the expected residual value at the end of the lease term will be $50,000. Jensen amortizes all of its leased equipment on a straight-line basis. 4. The lease agreement requires equal annual rental payments, beginning on January 1, 2020. 5. The collectibility of the lease payments is probable. 6. Glaus desires a 5% rate of return on its investments. Jensen's incremental borrowing rate is 6%, and the lessor's implicit rate is unknown. Instructions (Assume the accounting period ends on…
On January 1, 2019, Caswell Company signs a 10-year cancelable (at the option of either party) agreement to lease a storage building from Wake Company. The following information pertains to this lease agreement: 1. The agreement requires rental payments of $100,000 at the beginning of each year. 2. The cost and fair value of the building on January 1, 2019, is $2 million. The storage building has not been specialized for Caswell. 3. The building has an estimated economic life of 50 years, with no residual value. Caswell depreciates similar buildings according to the straight-line method. 4. The lease does not contain a renewable option clause. At the termination of the lease, the building reverts to the lessor. 5. Caswell’s incremental borrowing rate is 14% per year. Wake set the annual rental to ensure a 16% rate of return (the loss in service value anticipated for the term of the lease). Caswell knows the implicit interest rate. 6. Executory costs of $7,000 annually,…
Brown Enterprises enter into a 4 year lease with ABC Leasing Company. The lease qualifies as an operating lease. The first lease payment of $100,000 was due on January 1, 2024, on the date the lease was executed and all subsequent lease payments due on December 31. The present value of the lease payments was $348,685 and Brown Enterprises correctly recorded the right of use asset and lease liability on January 1, 2024 for this amount. The implicit rate in the lease is 10%. On its 2024 income statement, when Brown Enterprises reports its lease expense for 2024, it will be made up of which of the following components? (Choose all that apply) DAROU amortization $75,132 8. Interest expense $12,829 OCROU amortization $87,171 OD. Interest expense $24,869 Quesdan 12 of 25
The Lessor Company leases equipment to the Lessee Company on January 1, 2020. The lease is appropriately recorded as a purchase for accounting purposes for Lessee and as a sale for accounting purposes for Lessor. The lease is for a ten-year period. Equal annual payments under the lease are $30,000 and are due on January 1 of each year. The first payment is made on January 1, 2022. The cost of the equipment on Lessor's accounting records is $100,000. The equipment has an estimated useful life of ten years with no residual value expected. The of interest contemplated by Lessor and Lessee is 9 percent. Assume that the present value of the lease payments equals the market value of the equipment (selling price). Assume this is a sales-type lease. A.Prepare the entry or entries required for Lessor on January 1, 2022. A.Prepare the entry or entries required for Lessor on December 31, 2022. A.Prepare the entry or entries required for Lessor on January 1, 2023. A.Prepare the entry or entries…
Assume that on December 31, 2019, Teal Mountain Aerospace signs a 8-year, non-cancelable lease agreement to lease a hanger from Aero Field Management Company. The following information pertains to this lease agreement: 1. The agreement requires equal rental payments of $164,588 beginning on December 31, 2019. 2. The fair value of the building on December 31, 2019 is $1,114,500. The building has an estimated economic life of 10 years, a guaranteed residual value of $49,600, and an expected residual value of $34,900. Teal Mountain depreciates similar buildings on the straight-line method. 3. 4. The lease is nonrenewable. At the termination of the lease, the building reverts to the lessor. 5. Teal Mountain's incremental borrowing rate is 6% per year. The lessor's implicit rate is not known by Teal Mountain.
Vinubhai