Sage Hill Company leased equipment from Costner Company, beginning on December 31, 2016. The lease term is 4 years and requires equal rental payments of $106,180 at the beginning of each year of the lease, starting on the commencement date (December 31, 2016). The equipment has a fair value at the commencement date of the lease of $390,000, an estimated useful life of 4 years, and no estimated residual value. The appropriate interest rate is 6%.