Karla Salons leased equipment from Smith Co. on July 1, 2021, in a finance lease. The present value of the lease payments discounted at 11% was $39,200. Ten annual lease payments of $6,000 are due each year beginning July 1, 2021. Smith Co. had constructed the equipment recently for $35,000, and its retail fair value was $39,200. The total decrease in earnings (pretax) in Karla's December 31, 2021, income statement would be (ignore taxes): Multiple Choice $4,174. $2,214. $3,786. $4,312.