[Ralphie Dos Nachos]

so I’m confused how one lease liability is reduced by the total 20,000 pmt but then on the other question the lease liability is only reduced the amortization portion of the lease pmt.

View post on imgur.com

View post on imgur.com

[Mike]

In the first question, the lease payment is made at the beginning of the period- so all payment goes to principal (liability) reduction. In the second question, the effective interest rate method is used to determine the interest component (lease liability * rate implicit in the lease) over the year that the lease was outstanding.

[Author]

Replies