On January 1, year 9, Blue Co. leased a new machine from Green Co. The following information pertains to the lease:

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

$229,350

$222,200

$294,500

$0