On January 1, 2001, Wishful Thinking, a lessor, entered into a direct-financing lease agreement with Lennard Company.

The lease agreement required 6 equal annual payments of $50,000 at the end of each year.

The leased property had an estimated residual value of $14,000, which was guaranteed by an unrelated third party.

Wishful Thinking desired a 10% rate of return.

What was the amount that Wishful Thinking recorded as interest revenue on the lease at the end of the year 2002?

a. $26,750

b. $25,225.80

c. $24,744.20

d. $19,823.22