On January 2, year 1, 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, year 1, of $108,000 based on an appropriate
rate of interest. For year 1, Cole should record depreciation
(amortization) expense for the leased machine at

$0
$ 9,000
$13,500
$15,000

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