ABC Company, a calendar year corporation, leased a machine from XYZ Ltd. on July 1, 2019. Annual lease payments of $120,000 are due at inception and every year thereafter, on July 1. The present value of the lease payments on July 1, 2019, at an implicit interest rate of 5%, was $1,059,000. How much interest expense will ABC record on December 31, 2019, when the market interest rate was 4%?

Group of answer choices

$23,475

$26,475

$42,360

$37,560