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

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At the beginning of its fiscal year, Lakeside Inc. leased office space to LTT Corporation under a ten-year operating lease ag

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Answer 1

Answer #1

Answer:

LTT increases its earnings by $20,000

Explanation:

Working Note 1:

Quarterly lease payments = $43,000

:. Annual lease payment = $43,000*4 = $172,000

Working Note 2:

Depreciation = Cost ÷ Useful Life

= 3,800,000 ÷ 25

= $152,000

Effect of lease on first year i.e.,

Increase in earnings = Rent - Depreciation

= $172,000 - $152,000

= $20,000

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Answer 2

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