Kingbird, Inc. has entered an agreement to lease an old warehouse with a useful life...
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Kingbird, Inc. has entered an agreement to lease an old warehouse with a useful life of 5 years and a fair value of $22,000 from United Corporation. The agreement stipulates the following. - Rental payments of $5,449 are to be made at the start of each year of the 5-year lease. No residual value is expected at the end of the lease. - Kingbird must reimburse United each year for any real estate taxes incurred for the year. Last year, the cost of real estate taxes was $800, though these costs vary from year to year. - Kingbird must make a payment of $500 with the rental payment each period to cover the insurance United has on the warehouse. - Kingbird paid legal fees of $1,500 in executing the lease. Assuming Kingbird's incremental borrowing rate is 12% and the rate implicit in the lease is unknown, prepare the journal entry to record the initial lease liability and right-of-use asset for Kingbird. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to 0 decimal places, e.g. 5,275.)
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