Exhibit 20-3 On January 1, 2016, Quinn Company enters into a five-year sales-type lease with Andy Company. The lease requires Andy to make five annual payments at the beginning of the year, with the first payment due January 1, 2016. The lease includes a bargain purchase price of $10,000. Quinn requires a 10% rate of return. The cost to Quinn of the property is $100,000, and it has a fair value of $150,000.

Present value factors for a 10% interest rate are as follows:

Present value of $1 for n = 1 0.909091

Present value of $1 for n = 5 0.620921

Present value of an ordinary annuity for n = 5 3.790787

Present value of an annuity due for n = 5 4.169865

Refer to Exhibit 20-3. What is the amount of the annual lease payment Quinn would require (round the answer to the nearest dollar)?

a. $35,972 b. $39,570 c. $34,483 d. $37,931