On January 1, 2019, Ogleby Corporation signed a five-year noncancelable lease for equipment. The terms of the lease called for Ogleby to make annual payments of $120,000 at the end of each year for five years with title to pass to Ogleby at the end of this period. The equipment has an estimated useful life of 7 years and no salvage value. Ogleby depreciates similar equipment using the straight-line method. Ogleby accordingly accounts for this lease transaction as a finance lease. The minimum lease payments were determined to have a present value of $454,896 at an effective interest rate of 10%.

With respect to this lease, for 2019 Ogleby should record

a. interest expense of $45,490 and amortization expense of $64,985.

b. interest expense of $40,938 and amortization expense of $64,985.

c. interest expense of $38,039 and amortization expense of $64,985.

d. interest expense of $28,938 and amortization expense of $64,985