Finance lease debt/equity ratio

CFA Level II
#1

I got a question on FRA Chapter 17 on long-lived assets, specifically Leasing, Example 11 (pg 83). Sub-question #4. Company CAPBS reports the lease as a finance lease, and each year the lease liability decreases. The solution to #4 says that total liabilitieies at the end of Year 1 is 100,000+71,321+7,132 = 178,453.

My question is why do we still account for 100,000 after year 1, shouldn’t it have already decreased to 71,321, so it will just be 71,321 (end of year 1 liabilities) + 7,132 (accured interest payable for next year)?

#2

The lesse liability did decrease to as you describe. The $100k that still remains is something else. Unfortunately, the pv of the lease payments and this other $100k are both the same amount, making it easy to confuse them. Look at opis’s liability. They have that same $100k other liability.

#3

ah you are right! That’s some other liability at the beginning of year 1. Thanks!