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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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In the third year of a 6-year finance lease, the portion of the lease payment applicable to the reduction of the lease liability should be:

  1. a. less than in the second year
  2. b. more than in the second year
  3. c. the same as in the fourth year
  4. d. more than in the fourth year

To determine

Identify the correct option for the given case “in the third year of a six-year lease, the portion of the lease payment applicable to the reduction of the lease liability should be:”

Explanation

In lease, the amortization on the right-of-use asset will increase and interest expense amount will decrease over a lease period.

By the above explanation,

b) In the third year of lease, the portion of lease payment applicable to the reduction of lease liability should be more than in the second year. Thus, option b is the correct answer...

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