On December 31, 20X4, Blue co. leased a new machine from Green co. with the following pertinent information:

Lease term	5 years
Annual rental payable at beginning of each year	$55,000
Useful life of machine	7 years
Blues incremental borrowing rate	12%
Implicit interest rate in lease (known by Blue)	10%
Present value of annuity of $1 in advance for 5 periods at:
10%	4.17
12%	4.04

There is no bargain purchase option but title transfers to Blue co. at the end of the lease. The cost of the machine on Greens accounting records is $294,500. At the beginning of the lease term, Blue co. should record a lease liability of

$222,200

$0

$229,350

$294,500