On December 31, 2021, Sandhill, Inc. leased machinery with a fair value of $1375000 from Cey Rentals Co. The agreement is a 6-year noncancelable lease requiring annual payments of $265000 beginning December 31, 2021. The lease is appropriately accounted for by Sandhill as a finance lease. Sandhill's incremental borrowing rate is 11%. Sandhill knows the interest rate implicit in the lease payments is 10%. The present value of an annuity due of 1 for 6 years at 10% is 4.7908. The present value of an annuity due of 1 for 6 years at 11% is 4,69590 In Its December 31, 2021 balance sheet, Sandhill should report a lease liability of $1220934 $1115000 5985608 $1245608