1.Wildcats purchased an oil rig for $5,000,000 on January 1, 2018. The life of the rig is 10 years and the expected cost to dismantle the rig at the end of 10 years is $1,600,000 (present value at 10% is $616,880). 10% is an appropriate interest rate for this company. What expense should be recorded for 2018 as a result of these events? Assume that it allocates the asset acquisition and retirement cost to expense using the straight-line method.

a. Depreciation expense of $660,000 and interest expense of $160,000

b. Depreciation expense of $660,000 and interest expense of $61,688

c. Depreciation expense of $500,000 and interest expense of $160,000

d. Depreciation expense of $561,688 and interest expense of $61,688