In a ten-year finance lease agreement, the portion of the periodic lease payment that represents interest in the third year is:

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Since interest is computed on the beginning balance of the liability account, as that balance is reduced, the interest component of subsequent payments is reduced. The interest portion of the payment in the third year will therefore be more than the interest portion of the payment in the fourth year.

In a Ten-Year Finance Lease Agreement, the Portion of the Periodic