Q2.

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On January 1, 2016, Dessin, Inc. signs a 10-year noncancelable lease agreement to lease a storage building from Nelson Company. The following information pertains to this lease agreement. 1. The agreement requires equal rental payments at the beginning of each year. 2. The fair value of the building on January 1, 2016 is $4,000,000; however, the book value to Holt is $3,300,000 3. The building has an estimated economic life of 10 years, with no residual value. Dessin depreciates similar buildings on the straight-line method. 4. At the termination of the lease, the title to the building will be transferred to the lessee. 5. Dessin's incremental borrowing rate is 11% per year. Nelson Co. set the annual rental to insure a 10% rate of return. The implicit rate of the lessor is known by Dessin, Inc. 6. The yearly rental payment includes $10,000 of executory costs related to taxes on the property. a) What is the amount of the minimum annual lease payment? (Rounded to the nearest dollar.) b) What is the amount of the total annual lease payment? c) From the lessor's viewpoint, what type of lease is involved? d) What amount would Dessin record depreciation expense on this storage building in 2016 of (Rounded to the nearest dollar.)