ACCR entered into a lease agreement on January 1 for the land and building that is used as the repair and body shop. ACCR is required to make monthly payments of $2,500, commencing January 31, for a 10-year period (at which point, John expects to be fully retired and live off of his pension). The following additional information is available regarding the lease: The rate implicit in the lease is 7%. The building and land have fair values of $170,000 and $56,667, respectively. The building has a useful life of approximately 13 years. The lease payments were set to provide the lessor with a return of 60% related to the building and 40% related to the land. There is no bargain purchase option, or renewal option, at the end of the lease.

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