Which of the following most accurately reflects the accounting for finance leases?

Which of the following most accurately reflects the accounting for finance leases?

Lease payments are expensed as each cash payment is made.

At the inception of the lease, the leased asset is capitalized and the present value of the minimum lease payments is set up a liability.

Each lease payment represents a 100% reduction in the lease obligation.

No asset or obligation is recognized at the inception of the lease.