Oak Co. leased equipment for its entire eight-year useful life, agreeing to pay $60,000 at the start of the lease term on December 31, Year 1, and $60,000 annually on each December 31 for the next seven years. The present value on December 31, Year 1, of the eight lease payments over the lease term, using the rate implicit in the lease which Oak knows to be 10%, was $406,000. The December 31, Year 1, present value of the lease payments using Oak's incremental borrowing rate of 12% was $389,000. Oak made a timely second lease payment. What amount should Oak report as a lease liability in its December 31, Year 2, balance sheet

• A.

  $301,900

• B.

  $0

• C.

  $320,600

• D.

  $420,000