On December 31, 2020, Harris Co. leased a machine from Catt, Inc. for a five-year period. Equal annual payments under the lease are $600,000 and are due on December 31 of each year, starting on December 31, 2020. The five lease payments are discounted at 10% over the lease term (the appropriate PV of annuity due factor is 4.16986). The lease is appropriately accounted for as a finance lease by Harris. In its December 31, 2020 balance sheet, Harris should report a lease liability of (rounded to nearest $1):

Hint: remember how the first payment is treated with regard to allocation between interest and liability reduction.

a.$2,627,012

b.$1,997,012

c.$1,901,916

d.$2,501,916