On July 1, 2006, South Co. entered into a ten-year operating lease for a warehouse facility. The annual minimum lease payments are $100,000. In addition to the base rent, South pays a monthly allocation of the building’s operating expenses, which amounted to $20,000 for the year ended June 30, 2007. In the notes to South’s June 30, 2007 financial statements, what amounts of subsequent years’ lease payments should be disclosed?

  1. $100,000 per annum for each of the next five years and $500,000 in the aggregate.
  2. $120,000 per annum for each of the next five years and $600,000 in the aggregate.
  3. $100,000 per annum for each of the next five years and $900,000 in the aggregate.
  4. $120,000 per annum for each of the next five years and $1,080,000 in the aggregate.