SSI Corporation leased equipment to RRI Company on January $1,20$X$6,$ for a $10-$year lease. The equipment has an economic life of $20$ years, a residual value at the end of lease term of

$$20,000,$ and a residual value at the end of economic life of zero. RRI incurred legal fees of $$5,000$ to negotiate the terms of the lease agreement The lease contains a purchase option

that allows RRI to purchase the leased equipment at the end of the lease term for $$10,000.$ Equal lease payments of $$5,000$ are made on each December $31,$ with the first payment made

on December $31,20$X$6.$The applicable interest rate to both the lessee and the lessor is $8\%.$ What is the total amount that RRI should record for interest and depreciation expense at

December $31,208?$

Multiple Choice

Interest Expense: $$2,731$ Depreciation Expense: $$4,318$

Interest Expense: $$3,055$ Depreciation Expense: $$2,159$

Interest Expense: $$3,455$ Depreciation Expense: $$4,318$

Interest Expense: $$2,731$ Depreciation Expense: $$2,159$