The Fine brothers (Curly, Larry & Moe) signed a 7 year lease on a new dump truck for their new construction business. They want to report the lease as a long term liability. The lease payments of $1500 are made at the beginning of each month and the interest on the lease is set at 9% compounded monthly.
(a) What initial liability can the boys report on their balance sheet?
(b) How much of the liability will be reduced during the second year of the lease?