Melnik Shops. Inc., a chain of specialty women’s apparel stores, reported the following information about leases in its annual report (in thousands):

...................................................................................December 31

...............................................................................2017...................2016

Capital lease asset, gross..................................$ 1,960................ $1,960

Less: Accumulated depreciation............................1,421..................1,323

Capital lease asset, net.........................................$ 539....................$ 637

Capital lease obligation ..........................................$ 842 ...................$ 864

The only asset under a capital lease is a warehouse and office building. The building has an economic life of twenty years and is being depreciated on a straight-line basis. Lease payments are made on the last day of the year.

Required: a. Calculate the depreciation expense on the warehouse and office building for the fiscal year ending December 31, 2017.

b. The interest on the lease obligation was $108 (in thousands) in fiscal 2017. What is the interest rate used for the lease obligation? What was the total lease payment on December 31, 2017? Reconstruct the 2017 journal entry.

c. In what year was the building placed into service?