Ballard Company rents a warehouse on a month-tomonthbasis for the storage of its excess inventory. Thecompany periodically must rent space whenever its productiongreatly exceeds actual sales. For several years,the company officials have discussed building their ownstorage facility, but this enthusiasm wavers when salesincrease sufficiently to absorb the excess inventory. Whatis the nature of this type of lease arrangement, and whataccounting treatment should be accorded it?
Ballard Company rents a warehouse on a month-tomonth
basis for the storage of its excess inventory. The
company periodically must rent space whenever its production
greatly exceeds actual sales. For several years,
the company officials have discussed building their own
storage facility, but this enthusiasm wavers when sales
increase sufficiently to absorb the excess inventory. What
is the nature of this type of lease arrangement, and what
accounting treatment should be accorded it?
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