On January 1, 2014, Kathy Corp. leased equipment by signing a five-year lease that required five payments of $60,000 due on December 31 of each year. Kathy has a 9% cost of capital and capitalized the lease on January 1, 2014, in the amount of $233,379. As of December 31, 2014, what amount is reported as the current portion of the lease obligation?

Question

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The current portion of the lease obligation is the principal portion of the payment due within the next year. The interest for the first year is $233,379 * 9% = $21,004. The principal portion of the first payment is $60,000 - $21,004 = $38,996. The remaining principal balance after the first payment is $233,379 - $38,996 = $194,383. The interest for the second year is $194,383 * 9% = $17,494. The principal portion of the second payment is $60,000 - $17,494 = $42,506, which is the current portion of the lease obligation as of December 31, 2014.