On January 1, 2004, Digital, Inc. leased heavy machinery from Young Leasing Company. The terms of the lease require annual payments of
$20,000 for twenty years beginning on December 31, 2004. The interest rate on the lease is 10%.
Assume the lease qualifies as acapital lease.
1. Calculate the amount of the lease liability at December 31, 2005 that would be classified as a current liability.
2. Calculate the balance in the lease liability account on december 31, 2005 after the second lease payment is made. Thank you