At the beginning of its fiscal year, Lakeside Inc. leased office space to LTT Corporation under a twelfth-year operating lease agreement. The contract calls for quarterly rent payments of $42,000 each. The office building was acquired by Lakeside at a cost of $3.7 million and was expected to have a useful life of 25 years with no residual value.
What will be the effect of the lease on LTT’s earnings for the first year (ignore taxes)?