What would the ice cream parlor list on it's balance sheet?

Question

An ice cream parlor enters into a 5 year capital lease on 1/1/08. Present value of the lease was $22,250.00. The parlor depreciates assets using the stright-line method. Year end is 12/31/08. What is the net balance reported?

I am coming up with $13,350.00. and am frustrated!!!! Please help this Mama in need!

Answer 1

If they prepaid the lease (unlikely) it would be carried as an asset.

Otherwise the balance due is a liability.  The amount due within a year is a current liability and any amounts that will fall due beyond a year are long term liabilities.

Hope this helps

Jerry-the-bookkeeper