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On January 1, Lessee Company leases equipment with a useful life of 5 years for...

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Accounting

On January 1, Lessee Company leases equipment with a useful life of 5 years for a 6-year lease term. Payments of $88,000 are due at the beginning of each year. The incremental borrowing rate is 4%. The present value of the payments is $407,440. Which of the following is true?

a. Interest expense at the end of the first year is $407,440 x .04

b. Amortization expense at the end of the first year is $407,440 divided by 6.

c. Lease expense at the end of the first year is $88,000.

d. Interest expense at the end of the first year is $319,440 x .04

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