Wasteoftime

bluejazzy Wrote:
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> i dont understand why its -10,000 though. I would
> think its 43121 x 0.08 to find the interest
> expense, and then take 10000 subtract that to find
> the liability repayment

You start the lease on 1st Jan 2006.

When you calculate interest for the year, it has to be calculated on the principal remaining because that is 'what you have to pay back, what you have borrowed'

Since you pay 10,000 immediately on 1st of Jan 2006 itself, for the year 2006, you have principal remaining of only 43121 - 10,000 = 33121

On this principal, you accrue 8% interest in the whole 2006 year and you pay it on 1st Jan 2007 as part of the next $10,000 payment.