MC Qu. 47 LO 15-05 Refer to the following lease amortization schedule. The 10...

Refer to the following lease amortization schedule. The 10 payments are made annually starting with the inception of the lease. Title does not transfer to the lessee and there is no bargain purchase option or guaranteed residual value. The asset has an expected economic life of 12 years. The lease is noncancelable.

Payment	Cash Payment	Effective Interest	Decrease in balance	Balance
				81,108
1	12,000		12,000	69,108
2	12,000	6,911	5,089	64,019
3	12,000	6,402	5,598	58,421
4	12,000	5,842	6,158	52,263
5	12,000	5,226	6,774	45,489
6	12,000	4,549	7,451	38,038
7	12,000	3,804	8,196	29,842
8	12,000	2,984	9,016	20,826
9	12,000	?	?	?
10	12,000	?	?	?

What is the total effective interest paid over the term of the lease?

$38,892.

$120,000.

$69,108.

$81,108.