A lessee had a ten-year capital lease requiring equal annual
payments. The reduction of the lease liability in year two should
equal

(a) When a leasing agreement is accounted for as capital
lease, the lessee recognizes a liability on its books equal to the
present value of the minimum lease payments. The liability
should be divided between current and noncurrent based upon
when each lease payment is due. At the end of year one, the current
lease liability should equal the principal portion of the lease
payment due in year two. Therefore, when the lease payment is
made in year two, the reduction of the lease liability will equal the
current liability shown at the end of year one.