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Not sure of the logic behind this solution:
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?
a.$66,000
b.$74,250
c.$73,500
d.$73,636
The answer is “c”. What I don’t understand is, why are they including the payment from Year 3 in the calculation?
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