Abadan Company, as lessee, enters into a lease agreement on July 1, 2021, for equipment. The following data are relevant to the lease agreement: 1. The term of the noncancelable lease is 4 years. Payments of $978,446 are due on July 1 of each year.
2. The fair value of the equipment on July 1, 2021 is $3,500,000. The equipment has an economic life of 6 years with no salvage value.
3. Abadan depreciates similar machinery it owns on the sum-of-the-years'-digits basis.
4. The lessee pays all executory costs.
5. Abadan's incremental borrowing rate is 10% per year. The lessee is aware that the lessor used an implicit rate of 8% in computing the lease payments (present value factor for 4 periods at 8%, 3.57710; at 10%, 3.48685).
What is the credit to Lease Liability on December 31, 2021?