E21-3 Lessee Entries Executory Costs Unguaranteed Residual
Not what you're looking for?
E21-3 (Lessee Entries, Capital Lease with Executory Costs and Unguaranteed Residual Value) Assume that on January 1, 2012, Kimberly-Clark Corp. signs a 10-year noncancelable lease agreement to lease a storage building from Trevino Storage Company. The following information pertains to this lease agreement.
1. The agreement requires equal rental payments of $90,000 beginning on January 1, 2012.
2. The fair value of the building on January 1, 2012, is $550,000
"3. The building has an estimated economic life of 12 years, with an unguaranteed residual value of
"
$10,000 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 12% per year. The lessor's
implicit rate is not known by Kimberly-Clark.
6. The yearly rental payment includes $3,088.14 of executory costs related to taxes on the
property.
Instructions:
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 2012 and 2013. Kimberly-Clark's corporate year end is December 31.
Purchase this Solution
Solution Summary
See excel attached with instructional notes.
Education
- BSc, University of Virginia
- MSc, University of Virginia
- PhD, Georgia State University
Recent Feedback
- "hey just wanted to know if you used 0% for the risk free rate and if you didn't if you could adjust it please and thank you "
- "Thank, this is more clear to me now."
- "Awesome job! "
- "ty"
- "Great Analysis, thank you so much"
Purchase this Solution
Free BrainMass Quizzes
Motivation
This tests some key elements of major motivation theories.
Understanding Management
This quiz will help you understand the dimensions of employee diversity as well as how to manage a culturally diverse workforce.
Production and cost theory
Understanding production and cost phenomena will permit firms to make wise decisions concerning output volume.
Organizational Behavior (OB)
The organizational behavior (OB) quiz will help you better understand organizational behavior through the lens of managers including workforce diversity.
SWOT
This quiz will test your understanding of the SWOT analysis, including terms, concepts, uses, advantages, and process.