of the equipment's fair value. 3. On January 1, 2021, Cullumber Corporation signed a five-year noncancelable lease for equipment. The terms of the lease called for Cullumber to make annual payments of $185,000 at the beginning of each year for 5 years, and contains a bargain purchase option. The equipment has an estimated useful life of 7 years and no salvage value. Cullumber uses the straight-line method of depreciation for all of its fixed assets. Cullumber accordingly accounts for this lease transaction as a finance lease. The lease payments were determined to have a present value of $758,953 at an effective interest rate of 11%. With respect to this capitalized lease, for 2021 Cullumber should record