On December 31, year 1, Day Co. leased a new machine from Parr with the following pertinent information: Lease term 8 years Annual rental payable at beginning of each year $60,000 Useful life of machine 10 years Day's incremental borrowing rate 15% Implicit interest rate in lease (known by Day) 12% The lease is not renewable, and the machine reverts to Parr at the termination of the lease. The cost of the machine on Parr's accounting records is $425,000. Required: At the beginning of the lease term, what should Day record as a lease liability?