Ace Construction has signed a five$-$year lease with GMAC $on$ a new dump truck. Ace intends $to$ capitalize the lease and report $itas$ 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 $at6\%$ compounded quarterly.

$i.$What initial liability should Ace report $on$ its balance sheet?

$ii.$How much will the liability $be$ reduced during the first year $of$ the lease?