General information about your company:

Incremental borrowing rate 5 %

Number of common shares authorized 250,000

Number of common shares issued and outstanding as of the end of last year 42,000

Par value of common stock $1.00

Tax rate 21%

At the start of the year, your company entered a 10-year lease for a warehouse. Rental payments of $90,000 are due at the start of the lease and December 31 of every year thereafter until a total of 10 payments have been made. The fair value of the warehouse at the start of the lease is $800,000. The warehouse is expected to have an economic life of 15 years and a residual value of $25,000. Your lease agreement does not contain a residual value guarantee.