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kaheart [24]
3 years ago
5

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 $68,099 beginning on December 31, 2019. 2. The fair value of the building on December 31, 2019 is $498,137. 3. The building has an estimated economic life of 12 years, a guaranteed residual value of $10,000, and an expected residual value of $6,000. 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 8% per year. The lessor’s implicit rate is not known by Kimberly-Clark.Required: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.
Business
1 answer:
GarryVolchara [31]3 years ago
7 0

Answer:

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

December 31, 2019, lease agreement signed

  • Dr Right of use 493,506
  •     Cr Lease liability 493,506

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 = 68,099
  • r = 8%
  • n - 1 = 10 - 1 = 9

PV annuity due = 68,099 + {68,099 x [1 - (1 + 0.08)⁹]/0.08} = 68,099 + 425,407 = $493,506

the journal entries to record the annual lease payments:

December 31, 2019, annual lease payment

  • Dr Lease liability 68,099
  •     Cr Cash 68,099

December 31, 2020, annual lease payment

  • Dr Lease liability 34,066
  • Dr Interest expense 34,033
  •     Cr Cash 68,099

interest expense = ($493,506 - $68,099) x 8% = $34,033

December 31, 2020, depreciation expense

  • Dr Depreciation expense - leased building 49,351
  •     Cr Accumulated depreciation - leased building 49,351

December 31, 2021, annual lease payment

  • Dr Lease liability 31,307
  • Dr Interest expense 36,792
  •     Cr Cash 68,099

interest expense = ($425,407 - $34,066) x 8% = $31,307

December 31, 2021, depreciation expense

  • Dr Depreciation expense - leased building 49,351
  •     Cr Accumulated depreciation - leased building 49,351
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3 years ago
Jamie received a bonus of $3,000. She decided to deposit the money in a savings account that earns 3.5% compounded daily for 180
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x= time period

One must note that “x” and “R” must be in same time-frame i.e. if the rate is compounded daily, time period must be considered daily and so on.

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Amount= $1,466,844.98

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3 years ago
The monetary arrangements made at bretton woods resulted in what type of exchange rates assigned to member nations’ currencies?
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3 0
2 years ago
Duffert Industries has total assets of $940,000 and total current liabilities (consisting only of accounts payable and accruals)
Studentka2010 [4]

Answer:

ROE = 13.04%

ROIC = 7.83%

Explanation:

Data provided in the question:

Total assets = $940,000

Total current liabilities = $130,000

Interest rate on its debt = 8%

Tax rate = 40%

The firm's basic earning power ratio = 14%

Debt-to capital rate = 40% = 0.40

Now,

Basis earning power = EBIT ÷ Total Assets

or

EBIT = Basis earning power × Total assets

= 14% × $940,000

= $131,600

Total Assets  = Total Debt + Total Equity + Total Current Liabilities

$940,000 = Total Debt + Total equity + $130,000

Debt + Equity  = $940,000 - $130,000

= $810,000

Debt to capital ratio = Debt ÷ [ Debt + Equity ]

0.40 = Debt ÷ $810,000

or

Total Debt = $324,000

Thus,

Debt + Equity  = $810,000

or

$324,000 + Equity = $810,000

or

Equity = $810,000 - $324,000

= $486,000

Interest = 8% of Debt

= 0.08 × $324,000

= $25,920

Taxes = 40% of [ EBIT - Interest ]

= 0.40 × ($131,600 - $25,920 )

= $42,272

Therefore,

ROE = [ EBIT - interest - Taxes ] ÷  Equity

= [$131,600 - $25,920 - $42,272 ] ÷ $486,000

= 0.1304

= 13.04%

ROIC = [ EBIT - interest - Taxes ] ÷ Total capital

= [$131,600 - $25,920 - $42,272 ] ÷ [Debt + Equity]

= [$131,600 - $25,920 - $42,272 ] ÷ $810,000

= 0.0783 = 7.83%

5 0
2 years ago
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