On January 1, 2021, Oriole Corporation signed a five-year noncancelable lease for equipment. The terms of the lease called for Oriole to make annual payments of $135000 at the beginning of each year for 5 years with title passing to Oriole at the end of this period. The equipment has an estimated useful life of 7 years and no salvage value. Oriole uses the straight-line method of depreciation for all of its fixed assets. Oriole accordingly accounts for this lease transaction as a finance lease. The lease payments were determined to have a present value of $553831 at an effective interest rate of 11%.

With respect to this capitalized lease, for 2021 Oriole should record

interest expense of $46071 and amortization expense of $79119.

interest expense of $74250 and amortization expense of $140040.

rent expense of $135000.

interest expense of $46071 and amortization expense of $110766.