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 $35,000 each. The office building was acquired by Lakeside at a cost of $3.0 million and was expected to have a useful life of 30 years with no residual value. What will be the effect of the lease on LTTs earnings for the first year (ignore taxes)?

reduces its earnings by $35,000 LTT