Lessee leased a machine from Lessor under a 10-year, noncancelable lease. The transaction was properly classified as a finance lease, and a right-of-use asset and a lease liability of $100,000 were recorded. The $14,900 annual payments made at the end of each lease period were discounted at 8% implicit interest to derive the initial $100,000 amounts. Lessee should record the following interest expense at the end of Years 1 and 2: Please show solution

• Year 1

  Year 2

• A.

  $8,000

  $8,000

• B.

  $8,000

  $7,448

• C.

  $8,000

  $7,360

• D.

  $6,900

  $7,452