On $1$ st January $201,$ the entity entered as lessee, into a three$-$year lease of a machine that had an economic life of eight years, at the end of which it is expected to have no residual value. At the inception of the lease, the fair value $($cash cost$)$ of the machine was $10,000.$

On $31$ December for each of the three years of the lease term, the entity is expected to pay $3,880.$

The depreciation method is straight$-$line. The interest rate implicit in the lease is eight percent per year.

$3.$ Based on the amortised cost method, the interest amount for the first and two years consecutively is:

a$.800$;$553\mathrm{.}57$ interest income

b$.800$; $553\mathrm{.}57$ interest expense

c$.553\mathrm{.}57$; $zero$ interest income

d$.$ none of the above

$4.$ The payment related accounting entry on $31$ Dec $201$ is:

a$.$

b$.$

$\backslash$table$[[$DEBIT Lease,$3,080$