Assume Keller Co. pays 10% of sales to occupy a retail space in a mall. The lease agreement has three-year noncancelable term. Based on prior history in that location, the company estimates that its percentage of rent charge will amount to approximately $1,500 per month.

1. Evaluate how the Codification addresses this rental charge and whether Keller Co. should include the percentage rent charge in measuring its lease liability?
2.