Question

On January 1, 2018, Betty DeRose, Inc. leased office furniture and equipment
from Young Leasing Company. The terms of the lease require annual payments
of $50,000 for 10 years with the first payment being due on December 31, 2018.
Assume the interest rate on the lease is 10% and the lease qualifies as a
capital lease. Betty DeRose depreciates all assets using the double-declining
balance method.

Calculate the amount of the lease balance liability at December 31, 2019 that
would be classified as a long-term liability. Enter your answer with two places
after the decimal point (i.e., 10,123.40). 

Answer 1

Calculation of amount of lease liability to be booked at the start if the lease i.e. on Jan.1,2018
Year	Lease payment	Discount Factor @ 10%	Present Values
2018	$50,000.00	0.9090909	$45,454.55
2019	$50,000.00	0.8264463	$41,322.31
2020	$50,000.00	0.7513148	$37,565.74
2021	$50,000.00	0.6830135	$34,150.67
2022	$50,000.00	0.6209213	$31,046.07
2023	$50,000.00	0.5644739	$28,223.70
2024	$50,000.00	0.5131581	$25,657.91
2025	$50,000.00	0.4665074	$23,325.37
2026	$50,000.00	0.4240976	$21,204.88
2027	$50,000.00	0.3855433	$19,277.16
Lease Liability			$307,228.36
Calculation of amount of lease balance liability at December 31,2019
Date	Yearly Payment	Towards Interest	Towards Lease liability	Lease balance liability
A	B	C	D=B-C	E
Jan.1,2018				$307,228.36
31st Dec.2018	$50,000.00	$30,722.84	$19,277.16	$287,951.19
31st Dec.2019	$50,000.00	$28,795.12	$21,204.88	$266,746.31
The amount of lease balance liability that would be classified as a long term liability at Dec.31,2019 =									$266,746.31