6 At the beginning of its fiscal year, Lakeside Inc. leased office space to LTT

Question

6 At the beginning of its fiscal year, Lakeside Inc. leased office space to LTT Corporation under a ten-year operating lease agreement The contract calls for quarterly rent payments of $28,000 each. The office building was acquired by Lakeside at a cost of $2.3 million and was expected to have a useful life of 25 years with no residual value 0.62 points What will be the effect of the lease on LTT's earnings for the first year (ignore taxes)? (Enter your answer in whole dollars.) 02:52:20 LTT reduces its earnin eBook Print References

Explanation / Answer

Ans:

LTT reduces its earnings by ($28,000 * 4) = $1,12,000

as it is an operating lease.

Thus, LTT will record rent expense which will reduce its earnings $1,12,000 every year.

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