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How would kregor construction classify the lease

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Merick Inc. purchased a building for $2 million to be leased. The building is expected to have a 45-year life with no salvage value. The building was leased immediately by Kregor Construction for $130,000 a year payablejanuary 1 of each year startinglanuary 1, 2020. The lease term is ?ve years with no renewal or purchase option reasonably expected to be exercised. There are no uncertainties surrounding collection. The implicit rate of the lease is 7% known by Kregor Construction.

Problem 1: How would Kregor Construction classify the lease?

Reference no: EM132719507

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