Refer to the following lease amortization schedule. The five payments are made annually starting with the inception of the lease. A $2,000 bargin purchase option is exercisable at the end of the five-year lease. The asset has an expected economic life of eight years.

Lease Payment	Cash Payment	Effective Interest	Decrease in Balance	Balance
				34,600
1	8,000	??	??	26,600
2	8,000	2,660	5,340	21,260
3	8,000	2,126	5,874	15,386
4	8,000	1,539	6,461	8,925
5	8,000	??	??	??
6	2,000	182	1,818	0

What is the effective annual inerest rate?

A. 9%

B. 10%

C. 11%

D. 20%

What would the lessee record as annual depreciation on the asset using the straight-line method, assuming no residual value?

A. $3,325

B. $6,920

C. $4,325

D. $5,320

What is the total interest paid over the term of the lease?

A. $42,000

B. $8,200

C.$7,400

D. $3,460

What is the outstanding balance after payment 5?

A. $1,818

B. $2,000

C. $2,182

D. $3,818

What would be the amount of interest expense recorded with payment 5?

A. $2,000

B. $893

C. $7,107

D. $1,107