AM mock - q59 (capital lease) 200, beginning, interest, question

andytrader

hi guys,
can you please help me the question below?

---q59/FSA/capital leases---

my answer was B, which is incorrect.

annual lease PMT = 2,000
./. implicit interest t=1 10,000*.12
= depreciation in t=1
= 800

beginning balance of capital lease on BS = 9,200
implicit interest in t=2 9,200*.12=1,104

the solution deducts the WHOLE lease pmt from the initial BS value so that the opening balance in year 2 is 8,000. but this is incorrect to do, isnt it?

cheers