Blossom, Inc. leased equipment from Tower Company under a 4-year lease requiring equal annual payments of $214,152, with the first payment due at lease inception. The lease does not transfer ownership, nor is there a bargain purchase option. The equipment has a 4 year useful life and no salvage value. Blossom, Inc.'s incremental borrowing rate is 9% and the rate implicit in the lease (Which is known by Blossom, Inc.) is 7%. Assuming that this lease is property classified as a capital lease, what is the amount of principal reduction recorded when the second lease payment is made in year 2?

PV Annuity Due. PV Ordinary Annuity 7%, 4 periods. 3.62432. 3.38721

9%, 4 periods. 3.53129. 3.23972

$144,831

$174,812

$163,376

$214,152