Ace Construction has signed a five$-$year lease with GMAC on a new dump truck. Ace intends to capitalize the lease and report it as a long$-$term liability. Lease payments of $$3500$ are made at the beginning of each month. To purchase the truck, Ace would have had to borrow funds at $6\%$ compounded quarterly.

What initial liability should Ace report on its balance sheet?

How much will the liability be reduced during the first year of the lease?