The following footnote was disclosed at the beginning of 2011 (January 1, 2011).

At January 1, 2011

	Capital Lease	Operating Lease
Year	Payment	Payment
2011	$ 5,000	$ 6,000
2012	5,000	6,000
2013	5,000	6,000
2014	5,000
2015	5,000
Total payments	$25,000	$18,000
Interest (10%)	6,046
Present value	$18,954

The capital lease began on January 1, 2010 when the fair value of the capital lease was $21,776 (with a six-year life). The operating lease began on January 1, 2011 when the fair value of the operating lease at the inception of the lease was $14,921 (with a three-year lease term). Straight-line depreciation is used for all assets. Each lease requires equal annual payments to be made at year-end.

Required:

1. Under existing U.S. GAAP, what is the amount of lease liability recorded on the balance sheet at January 1, 2011?

2. If the proposed changes in accounting for leases become authoritative, what would be the amount of lease liability recorded on the balance sheet at January 1, 2011?

3. Which approach (part 1 or part 2) do you think provides more relevant information to the users of the financial statements? Why?