Current Attempt in Progress

Assume that on December $31,2019,$ Kimberly$-$Clark Corp. signs a $10-$year, non$-$cancelable lease agreement to lease a storage

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

The agreement requires equal rental payments of $$71,830$ beginning on December $31,2019$

The fair value of the building on December $31,2019$ is $$525,176$

The building has an estimated economic life of $12$ years, a guaranteed residual value of $$10,000,$ and an expected residual

value of $$7,000.$ 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

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$($a$)$

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

$($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 $

$($c$)$

Suppose that in addition to the $$71,830$ annual rental payments, Kimberly$-$Clark is also required to pay $$5,000$ for insurance costs

each year on the building directly to the lessor, Sheffield Storage. How would this executory cost affect the initial measurement of

the lease liability and right$-$of$-$use asset? $($Round answer to $0$ decimal places, e$.$g$.5,275.)$

Lease liability $

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$($d$)$

Now suppose that, at the end of the lease term, Kimberly$-$Clark took good care of the asset and Sheffield agrees that the fair value

of the asset is actually $$10,000.$ Record the entry for Kimberly$-$Clark at the end of the lease to return control of the storag

lease liability has already been made$).($Credit account titles are

Account Titles and Explanation