On january 1, at the beginning of its fiscal year, Lakeside Inc. leased office space to LTT Corporation under a ten-year lease agreement. The contract calls for quarterly lease payments of $25,000 each at the end of each quarter. The office building was acquired by Lakeside at a cost of $1 million and was expected to have a useful life of 25 years with no residual value. Lakeside seeks a 10% return on its lease investments.
Appropriate adjusting entries are made quarterly.
1. What amounts related to the lease would LTT report on its balance sheet at December 31, 2016?
2. What amounts related to the lease would LTT report in its income statement for the year ended December 31, 2016 (ignore taxed)?