On January 2, 2011, Cole Co. signed an eight-year noncancelable lease for a new machine, requiring $15,000 annual payments at the beginning of each year. The machine has a useful life of twelve years, with no salvage value.

Title passes to Cole at the lease expiration date. Cole uses straight-line depreciation for all of its plant assets. Aggregate lease payments have a present value on January 2, 2011, of $108,000 based on an appropriate rate of interest.

For 2011, Cole should record depreciation (amortization)

expense for the leased machine at

a. $0

b. $ 9,000

c. $13,500

d. $15,000