1, what is the current lease liability on the balance sheet at the end of year 2? is that reduction of obligation or lease obligation??

2 when is the start of the lease term, is the 1/1/Y1 or 12/31/y1??

I understand is 1/1/y1 is the start of the lease term,

so I think the interest expense in year2 =the lease carrying value during year 1, multiplied by the effective rate.

the current lease liability on the balance sheet at the end of years =the annual minimum lease payment less the amount of interest incurred in year 2?

I don't understand why is incurred in year 3, if the start of the lease term, is the 1/1/Y1.

Scott Co. entered into a 5-year capital lease requiring it to make equal annual payments each year-end. The current lease liability on the balance sheet at the end of Year 2 should equal: Select one: a. The annual minimum lease payment. b. The annual minimum lease payment less the amount of interest incurred in Year 2 c. The annual minimum lease payment less the amount of interest to be incurred in Year 3 d.One-fifth of the original lease liability The correct answer is: The annual minimum lease payment less the amount of interest to be incurred in Year 3