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Assume a lessee has both operating and finance leases. The lease payments (end of year) are $500 for 5 years. The interest rate is 10%.

Assume a lessee has both operating and finance leases. The lease payments (end of year) are $500 for 5 years. The interest rate is 10%. The firm uses straight-line depreciation. What is the amount of the reduction in both the leased asset and the lease liability for the first year if the lease is an operating lease under US GAAP?

a. $379

b. $310

c. $189

d. $500

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