Question: Ace Construction has signed a five - year lease with GMAC on a new dump truck. Ace intends to capitalize the lease and report it

Ace Construction has signed a five-year lease with GMAC on a new dump truck. Ace intends to capitalize the lease and report it as a long-term liability. Lease payments of $3500 are made at the beginning of each month. To purchase the truck, Ace would have had to borrow funds at 6% compounded quarterly.
What initial liability should Ace report on its balance sheet?
How much will the liability be reduced during the first year of the lease?

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