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2. A company leases a machine on January 1, Year One for five years which call for annual payments of $4,000 for the first year

2. A company leases a machine on January 1, Year One for five years which call for annual payments of $4,000 for the first year and then $10,000 per year after that. The present value of these payments based on a reasonable interest rate of 10 percent is assumed to be $38,000. This lease is an operating lease. How much expense will the company recognize for Year One? a. $4,000 b. $7,600 c. $8,800 d. $11,400

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