James Corp. enters into an agreement with Mckee Inc. to lease manufacturing equipment used in its business. The lease payment is $200,000 on January 1 of each year for the next 3 years with an effective interest rate of 10%. Mckee Inc. provides a bargain purchase option (BPO) for the leased equipment for $10,000. The machine's useful life is 4 years. The present value factor for an ordinary annuity at 10% for 3 periods is 2.486 and the present value of $1 at 10% for 3 periods is .7513.

1) What is the amount of the lease obligation recorded for Year 1?

2) How much is recognized as the reduction in the lease obligation at the end of year 1 for item #B

3) Compute the lease obligation assuming McKee guaranteed a residual value of the equipment for $50,000 instead of the BPO?