Question: On December 31, 2017, Smith Corporation leased an airplane from Thomas Company for an eight-year period expiring December 30, 2025. Equal annual payments of $400,000 are due on December 31 of each year, beginning with December 31, 2017. The lease is properly classified as a capital lease on Smith 's books. The present value at December 31, 2017 of the eight lease payments over the lease term discounted at 10% is $2,347,370. Assuming all payments are made on time, the amount that should be reported by Smith Corporation as the total obligation under capital leases on its December 31, 2018 balance sheet is ....?
What is the total obligation at 12/31/18? How did you arrive at your amount? Please share you calculations and any questions that you have here.