Question

A 12-year capital lease specifies equal minimum annual lease payments. Part of this payment represents interest and part represents a reduction in the net lease liability. The portion of the minimum lease payment in Year 10 applicable to the reduction of the net lease liability should be:

Answer 1

Answer:

More than in year 8

Explanation:

A capital lease is a type of lease in which the lesser financed only the asset and all other ownership rights would be transferred to the lessee

In the given situation, the 12-year capital lease is equivalent to the annual lease payment at minimum cost

This payment involves the interest and the reduction amount

Now in the year 10 the reduction made to the lease liability should be more than in the year 8