On January 1, 2010, Larry, Inc.leased equipment, signing a five-year lease that requires five payments of $40, 000 due on January 1 of each year with the first payment due January 1, 2010.Larry accounted for the lease as a capital lease.Using a rate of 9%, Larry determined the present value on January 1, 2010, to be $169, 589.What is the amount of the long-term lease obligation that Larry should report on its December 31, 2011 balance sheet?
A)$ 70, 364
B)$101, 252
C)$112, 915
D)$129, 589

Question

Quizplus · Accepted Answer

By December 31, 2011, Larry would have made two payments, reducing the lease obligation. The present value of the remaining three payments at 9% interest rate needs to be calculated to find the long-term lease obligation.