On January 1, 2010, Karen Corp.leased equipment by signing a five-year lease that required five payments of $60, 000 due on December 31 of each year.Karen has a 9% cost of capital and capitalized the lease on January 1, 2010, in the amount of $233, 379.As of December 31, 2012, what amount is reported as the current portion of the lease liability?

Question

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The current portion of the lease liability is the portion of the lease obligation that is due within one year. As of December 31, 2012, there are three payments due within one year, each in the amount of $60,000. Therefore, the current portion of the lease liability is $60,000 x 3 = $180,000. However, the lease was capitalized in the amount of $233,379, so the carrying value of the lease liability as of December 31, 2012, is $233,379 - $180,000 = $46,331.