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Topic
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In the long-term liabilities section of its balance sheet at December 31, Year 1, Mene Co. reported a capital lease obligation of $75,000, net of current portion of $1,364. Payments of $9,000 were made on both January 2, Year 2, and January 2, Year 3. Mene’s incremental borrowing rate on the date of the lease was 11% and the lessor’s implicit rate, which was known to Mene, was 10%. In its December 31, Year 2, balance sheet, what amount should Mene report as capital lease obligation, net of current portion?
Answer is 73,500. I’m wondering why is there 2 annual interest expenses incurred for 1 year according to the answer? one is 7636, the other is 7500. Some one Plz HELP!
the solution is
12/31/Year 1
$76,364
1/2/Year 2
$9,000
$7,636
$1,364
$75,000
12/31/Year 2
$75,000
1/2/Year 3
$9,000
$7,500
$1,500
$73,500
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