On January 1, 2016, Reynolda Co. leased equipment by signing a five-year lease that required five payments of $30,000 due on January 1 of each year with the first payment due January 1, 2016. The equipment remains the property of the lessor at the end of the lease and Reynolda does not guarantee any residual value. Using a 10% cost of capital, Reynolda capitalized the lease on January 1, 2016, in the amount of $125,096. What is the amount of current portion of the lease obligation Reynolda should report on the December 31, 2017, balance sheet?

Question

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The current portion of the lease obligation is the principal portion of the lease payment due within the next year. By the end of 2017, Reynolda has made two payments, and the remaining lease obligation needs to be amortized. The principal portion of the payment due on January 1, 2018, is $22,539.