Professional Documents
Culture Documents
Residual Value
Assume that on January 1, 2017, Kimberly-Clark Corp. signs a 10-year noncancelable lease
agreement to lease a storage building from Sheffield Storage Company. The following
information pertains to this lease agreement.
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 2017 and 2018.
Kimberly-Clark’s corporate year-end is December 31.
Debit Credit
1/1/17
1/1/17
12/31/17
12/31/17
1/1/18
12/31/18
12/31/18
E21-6 (LO4) Lessor Entries, Sales-Type Lease
Crosley Company, a machinery dealer, leased a machine to Dexter Corporation on January 1,
2017. The first payment is received on January 1, 2017. Collectability of lease payments is
reasonably predictable, and no important uncertainties surround the amount of costs yet to be
incurred by Crosley. The machine has no residual value and reverts to Crosley at the termination
of the lease. Information concerning the lease appears below.
Instructions:
(a) Compute the amount of the lease receivable using Excel's present value function.
(b) Prepare all necessary journal entries for Crosley for 2017.
Debit Credit
1/1/17
1/1/17
12/31/17
P21-4 (LO2,4) Balance Sheet and Income Statement Disclosure—Lessee
The following facts pertain to a noncancelable lease agreement between Alschuler Leasing
Company and McKee Electronics, a lessee, for a computer system.
The collectability of the lease payments is reasonably predictable, and there are no important
uncertainties surrounding the costs yet to be incurred by the lessor. The lessee assumes
responsibility for all executory costs, which are paid each October 1, beginning October 1, 2017,
and are not included in the rental payment. The asset will revert to the lessor at the end of the
lease term. The straight-line depreciation method is used for all equipment.
The following amortization schedule has been prepared correctly for use by both the lessor and
the lessee in accounting for this lease. The lease is to be accounted for properly as a capital
lease by the lessee and as a direct-financing lease by the lessor.
Instructions:
(a) Assuming the lessee's accounting period ends on September 30, answer the following
questions with respect to this lease agreement.
(1) What items and amounts will appear on the lessee's income statement for the year
ending September 30, 2018?
(2) What items and amounts will appear on the lessee's balance sheet at September 30,
2018?
(3) What items and amounts will appear on the lessee's income statement for the year
ending September 30, 2019?
(4) What items and amounts will appear on the lessee's balance sheet at September 30,
2019?
(b) Assuming the lessee's accounting period ends on December 31, answer the following
questions with respect to this lease agreement.
(1) What items and amounts will appear on the lessee's income statement for the year
ending December 31, 2017?
(2) What items and amounts will appear on the lessee's balance sheet at December 31,
2017?
(3) What items and amounts will appear on the lessee's income statement for the year
ending December 31, 2018?
(4) What items and amounts will appear on the lessee's balance sheet at December 31,
2018?
ween Alschuler Leasing
.
October 1, 2017
years
years
The collectability of the lease payments is reasonably predictable, and there are no important
uncertainties surrounding the costs yet to be incurred by the lessor. The lessee assumes
responsibility for all executory costs, which are paid each October 1, beginning October 1, 2017,
and are not included in the rental payment. The asset will revert to the lessor at the end of the
lease term. The straight-line depreciation method is used for all equipment.
The following amortization schedule has been prepared correctly for use by both the lessor and
the lessee in accounting for this lease. The lease is to be accounted for properly as a capital
lease by the lessee and as a direct-financing lease by the lessor.
Instructions:
(a) Assuming the lessor's accounting period ends on September 30, answer the following
questions with respect to this lease agreement.
(1) What items and amounts will appear on the lessor's income statement for the year
ending September 30, 2018?
(2) What items and amounts will appear on the lessor's balance sheet at September 30,
2018?
(3) What items and amounts will appear on the lessor's income statement for the year
ending September 30, 2019?
(4) What items and amounts will appear on the lessor's balance sheet at September 30,
2019?
(b) Assuming the lessor's accounting period ends on December 31, answer the following
questions with respect to this lease agreement.
(1) What items and amounts will appear on the lessor's income statement for the year
ending December 31, 2017?
(2) What items and amounts will appear on the lessor's balance sheet at December 31,
2017?
(3) What items and amounts will appear on the lessor's income statement for the year
ending December 31, 2018?
(4) What items and amounts will appear on the lessor's balance sheet at December 31,
2018?
ween Alschuler Leasing
.
October 1, 2017
years
years