On December 31, 2011, Day Co. leased a new machine from Parr with the following pertinent information:

Lease term 6 years Annual rental payable at beginning of each year $50,000 Useful life of machine 8 years Day’s incremental borrowing rate 15%

Implicit interest rate in lease (known by Day) 12%

Present value of annuity of 1 in advance for 6 periods at 12% 4.61 15% 4.35 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 $375,500. At the beginning of the lease term, Day should record a lease liability of

a. $375,500

b. $230,500

c. $217,500

d. $0