Sorel Co. enters a lease for machinery from Sherman Co. Sorel appropriately accounts for the lease as a finance lease. The lease contains a bargain purchase option of $3,000 exercisable at the end of the three-year lease term. Sorel agrees to an annual lease payment of $11,000 due at the beginning of each period. Sorel knows the implicit interest rate is 4%. The present value factor of a single sum for three periods at 4% is .88900, the present value factor of an ordinary annuity for three periods at 4% is 2.77509, and the present value factor of an annuity due for three periods at 4% is 2.88609. What amount will Sorel record as the lease liability at the inception of the lease?

$33,193

$31,747

$34,414

$37,000