ch21-1 - Quiz 6 (chapter 21)-solution Assume that on...

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Quiz 6 (chapter 21)-solution Assume that on 1/1/2008, 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. 1. The agreement requires equal rental payments of $72,000 beginning on 1/1/2008. 2. The fair value of the building on 1/1/2008 is $440,000. 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 $2,470.51 of executory costs related to taxes on the property. 7. The present value of an annuity due of 1 (n=10, i=12%) is 6.32825. Questions for the lessee Kimberly-Clark:
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This note was uploaded on 10/10/2010 for the course ACCTG 472 taught by Professor Wright,suzanneal during the Fall '08 term at Pennsylvania State University, University Park.

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ch21-1 - Quiz 6 (chapter 21)-solution Assume that on...

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