ABC Inc. leases equipment for 10 years. The annual lease payment is $8,000. The interest rate for a 10-year collateralized loan for ABC is 8%. Which of the following is correct?

I The expenses related to the lease in year 1 will be greater if the lease is accounted for as a finance lease than if the lease is accounted for as an operating lease.

II The total expenses over the 10-year life of the lease if the lease is accounted for as a finance lease will equal the total expenses over the 10-year life of the lease if the lease is accounted for as an operating lease.

III The company will record interest expense if the lease is accounted for as a finance lease but not if the lease is accounted for as an operating lease.

Select one:

a. I, II and III

b. I and II

c. II and III

d. I and III

e. I