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Which of the following best describes current practice in accounting for leases?

Leases are not capitalized.

Leases similar to installment purchases are capitalized.

All long-term leases are capitalized.

All leases are capitalized.

On January 1, 2018, Ivanhoe Corporation signed a 10-year noncancelable lease for certain machinery. The terms of the lease called for Ivanhoe to make annual payments of $200000 at the end of each year for 10 years with the title passing to Ivanhoe at the end of this period. The machinery has an estimated useful life of 15 years and no salvage value. Ivanhoe uses the straight-line method of amortization for all of its fixed assets. Ivanhoe accordingly accounted for this lease transaction as a finance lease. The lease payments were determined to have a present value of $1656000 at an effective interest rate of 9%. With respect to this capitalized lease, Ivanhoe should record for 2018

lease expense of $234000.

interest expense of $131040 and amortization expense of $165600.

interest expense of $110400 and amortization expense of $97067.

interest expense of $149040 and amortization expense of $110400.