Daniels Company Entered into a Direct-Financing Lease with Old 7

Daniels Company entered into a direct-financing lease with Old 7 Corporation,which called for seven annual rentals of $3,500 at an interest rate of 12 percent.The payments are to be paid at the end of each year.The lease also contained a bargain purchase option allowing Old 7 to purchase the asset for $2,500 after making the seventh annual rental payment. What was the cost of the asset?

A) $17,104
B) $18,473
C) $25,631
D) $27,000

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