On January 1, 2018, Sunland Corporation signed a 10-year noncancelable lease for certain machinery. The terms of the lease called for Sunland to make annual payments of $235000 at the end of each year for 10 years with the title passing to Sunland at the end of this period. The machinery has an estimated useful life of 15 years and no salvage value. Sunland uses the straight-line method of depreciation for all of its fixed assets. Sunland accordingly accounted for this lease transaction as a capital lease. The lease payments were determined to have a present value of $1406000 at an effective interest rate of 9%. With respect to this capitalized lease, Sunland should record for 2018

interest expense of $93733 and depreciation expense of $80400.

lease expense of $202000.

interest expense of $126540 and depreciation expense of $93733.

interest expense of $108540 and depreciation expense of $140600.