AC 302 Chapter 21 Question 3

AC 302 Chapter 21 Question 3
Name				Date		
Instructor				Course		
Intermediate Accounting 14th Edition by Kieso Weygandt and Warfield						
Primer on Using Excel in Accounting by Rex A Schildhouse						
						
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- 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- corporate year end is December 31.						
						
						
						
	Capitalized amount of the lease:					
	Yearly payment			Amount		
	Executory costs			Amount		
	Minimum annual lease payment			Formula		
						
	Use the Excel Present Value (=PV) formula to determine the present value.					
						
Jan 1, 12	Account Title				Amount	
	Account Title					Amount
						
Jan 1, 12	Account Title				Amount	
	Account Title				Amount	
	Account Title					Amount
						
Dec 31, 12	Account Title				Amount	
	Account Title					Amount
						
Dec 31, 12	Account Title				Amount	
	Account Title					Amount
						
Jan 1, 13	Account Title				Amount	
	Account Title				Amount	
	Account Title				Amount	
	Account Title					Amount
						
Dec 31, 13	Account Title				Amount	
	Account Title					Amount
						
Dec 31, 13	Account Title				Amount	
	Account Title					Amount
						
Schedule 1:	KIMBERLY-CLARK CORPORATION (Lessee)					
	Lease Amortization Schedule					
	Annual Payment Less Executory Costs					
	Date	"Annual
Payment
Less
Executory
Costs"	"Interest (12%)
on Liability"	"Reduction
of
Lease Liability"	"Lease
Liability"	
	Jan 1, 12				Amount	
	Jan 1, 12	Amount	Amount	Formula	Formula	
	Jan 1, 13	Amount	Formula	Formula	Formula	
	Jan 1, 14	Amount	Formula	Formula	Formula