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Kruka [31]
3 years ago
11

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

ng from Sheffield Storage Company. The following information pertains to this lease agreement.
1. The agreement requires equal rental payments of $66,699 beginning on December 31, 2019.
2. The fair value of the building on December 31, 2019 is $487,529.
3. The building has an estimated economic life of 12 years, a guaranteed residual value of $9,000, and an expected residual value of $6,400. 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-Clarkâs incremental borrowing rate is 8% per year. The lessorâs implicit rate is not known by Kimberly-Clark.

Required:
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.
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?
c. Suppose that in addition to the $66,699 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?
Business
1 answer:
Anika [276]3 years ago
8 0

Answer:

a) the journal entry to record the signing of the lease agreement:

December 31, 2019, lease agreement signed

Dr Right of use 483,360

   Cr Lease liability 483,360

the lease liability must record the present value of the 10 annual lease payments: $68,099 and 8% discount rate:

present value of an annuity due = payment + {payment x [1 - (1 + r)⁻⁽ⁿ⁻¹⁾]/r}

  • payment = 66,699
  • r = 8%
  • n - 1 = 10 - 1 = 9

PV annuity due = 66,699 + {66,699 x [1 - (1 + 0.08)⁻⁹]/0.08} = 66,699 + 416,661 = $483,360

the journal entries to record the annual lease payments:

December 31, 2019, first annual lease payment

Dr Lease liability 66,699

   Cr Cash 66,699

December 31, 2020, second annual lease payment

Dr Lease liability 33,366

Dr Interest expense 33,333

   Cr Cash 66,699

interest expense = $416,661 x 8% = $33,333

December 31, 2020, depreciation expense

Dr Depreciation expense - leased building 48,336

   Cr Accumulated depreciation - leased building 48,336

December 31, 2021, third annual lease payment

Dr Lease liability 36,035

Dr Interest expense 30,664

   Cr Cash 66,699

interest expense = $383,295 x 8% = $30,664

December 31, 2021, depreciation expense

 Dr Depreciation expense - leased building 48,336

   Cr Accumulated depreciation - leased building 48,336

b) this would increase the right to use asset and lease liability by:

= -$5,000 + $1,000 = $4,000

c) this would increase the right to use asset and lease liability by:

= 5,000 + {5,000 x [1 - (1 + 0.08)⁻⁹]/0.08} = $36,234

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The actual cash received from cash sales was $3,930 and the amount indicated by the cash register total was $3,880. the journal
Nuetrik [128]

The actual cash received from cash sales was $14,356 and the amount indicated by the cash register total was $14290

a.what is the amount deposited in the bank for the day's sales?

14,356
Because this is the amount which is actually received by sales

b.What is amount recorded for the day's sales?

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Because this is the amount which has been recorded in the cash register.

c.How should the difference be recorded?

Dr Cash 14,356 
Cr Over/Short 66 
Cr Sales 14,290

d. If a cashier is consistently over or short what action should be taken?

First of all we need to find out that whether the cashier is genuinely making mistakes or there is a case of theft.There would be some close monitoring. If they are just mistakes, maybe some extra mentoring in cash handling would help.

E5-18

Part a and b are informational and thus we dont have to do anything with them.

Part c and d are reconciling terms.

Parts e and f needs entries to adjust the company's books. For e there needs to be a debit to cash for the incorrect amount and a credit for the correct amount. For f there needs to be a credit to cash.

E.
(Dr) Cash in bank $540 
(Cr) Accounts payable $540
$710 - $170

F.
(Dr) Bank charges $50 
(Cr) Cash in bank $50

Bank reconciliation:
Cash balance per book $24,010
Add: error $540 
Less: Debit memo $50
Adjusted book balance $24,500

Cash balance per bank $22,750
Add: Deposits in transit $9,100 
Less: Outstanding checks $7,350 
Adjusted bank balance $24,500

Hope you get it.

Get back to me in case you have any doubts.
I would be happy to help.

5 0
3 years ago
Help please
dimaraw [331]
Your answer is going to be B.
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Answer:

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3) in order to calculate federal income taxes, I used the 2019 tables and allowance:

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monthly paycheck between $7,333 - $13,710

must withhold $1,198.46 plus 24% in excess of $7,333

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8 0
3 years ago
Select TWO Mitchell, a calendar year taxpayer, is the sole proprietor of a fast-food restaurant. His adjusted basis for the buil
Advocard [28]

Answer:

a. The earliest date that Mitchell can acquire a new restaurant and qualify for  § 1033 postponement is March 12

b. On June 30

Mitchell purchases land and a building for $610,000

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c. Adjusted basis for the new land and building = Cost of land and building - Postponed gain = $610,000 - $160,000 = $150,000. Thus, adjusted basis for the new land and building purchase by Mitchell is $450,000

d. Realized gain = $625,000 - $450,000 = $175,000. Thus, the unrealized gain by not option for section §  loss = $175,000 and the adjusted basis for new land and building is $610,000

e. Under the section § 1033 , as no replacement property to purchased. Mitchell's recognized gain = $175,000

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3 years ago
Which situation best reflects the concept of free enterprise? Consumers have a choice between two bakeries in a single city bloc
svet-max [94.6K]
Free enterprise is when people enjoy many economic freedoms. Having this in mind, the situation that best reflects the concept of free enterprise is the first choice - consumers have a choice between two bakeries in a single city block.
4 0
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