Pharoah, Inc. leased equipment from Tower Company under a 4-year lease requiring equal annual payments of $384 152, with the first payment due at lease inception. The lease does not transfer ownership, nor is there a bargain purchase option. The equipment has a 4-year useful life and no salvage value. Pharoah, Inc.s incremental borrowing rate is 11% and the rate implicit in the lease (which is known by Pharoah, Inc.) is 9%. Assuming that this lease is properly classified as a finance lease, what is the amount of Lease Liability reduction recorded from the second payment?

	PV Annuity Due	PV Ordinary Annuity
9%, 4 periods	3.53129	3.23972
11%, 4 periods	3.44371	3.10245

1. 272143
2. 227489
3. 384152
4. 296636