On January 1, Cutlip Corp. signed a 8-year lease for equipment having a 10 years economic life. The present value of the monthly lease payments equal 80% of the equipments fair value. The lease agreement for neither a transfer of title to Cutlip nor a bargain purchase option. In the income statement during the first year of the lease, Cutlip will report:

• Lease expense and interest expense

• Amortization expense and interest expense

• Lease expense

• Lease expense and amortization expense