Ludwig Corporation leases a machine to Kluge Corporation under a three-year lease agreement determined to be a finance/sales-type lease. At the inception of the lease, What should be selected?
1) The fair value of the machine is equal to its carrying amount.
2) The fair value of the machine is less than its carrying amount.
3) The fair value of the machine is greater than its carrying amount.
4) The fair value of the machine is not relevant in this case.
