On December 31, 2008, Day Company leased a new machine from Parr with the following pertinent information:

The lease is not renewable, and the machine reverts to Parr at the termination of the lease. The cost of the machine on Parr’s accounting records is $375,500.
Required:
Compute the amount of Day’s lease liability at the beginning of the lease term.

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Lease term Annual rental payable at beginning of each year Useful life of machine Day's incremental borrowing rate Implicit interest rate in lease (known by Day) Present value of annuity of $1 paid at the start of each of six periods at 12% 15% 6 years $50,000 8 years 15% 12% 4.61 4.35