On January 1, 2021, Cullumber Corporation signed a 10-year noncancelable lease for certain machinery. The terms of the lease called for Cullumber to make annual payments of $140,015 at the end of each year for 10 years with the title passing to Cullumber at the end of this period. The machinery has an estimated useful life of 15 years and no salvage value. Cullumber uses the straight-line method of depreciation for all of its fixed assets. Cullumber accordingly accounted for this lease transaction as a financial lease. The lease payments were determined to have a present value of $939,512 at an effective interest rate of 8%. With respect to this lease, Cullumber should record for 2021

Select one:

a. lease expense of $75,161.

b. interest expense of $62,634 and depreciation expense of $49,301.

c. interest expense of $75,161 and depreciation expense of $62,634.

d. interest expense of $59,161 and depreciation expense of $93,951.