Lease Agreement Earnings Impact Calculation

What will be the effect of the lease agreement on Lakeside's earnings for the first year?

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 $37,000 each. What impact will this have on Lakeside's earnings for the first year?

The Effect of Lease Agreement on Lakeside's Earnings

The effect of the lease on Lakeside's earnings for the first year will be a positive amount of $148,000.

Since the lease agreement stipulates quarterly rent payments of $37,000 each, there will be a total of four quarters in the first year. To determine the effect on Lakeside's earnings, we calculate the total rent payments received during the year by multiplying the quarterly rent by the number of quarters:

$37,000 × 4 = $148,000

Therefore, the effect of the lease on Lakeside's earnings for the first year is a positive amount of $148,000. This represents the additional income Lakeside receives from the lease agreement, contributing to their overall earnings for the year.