On January 1, 2021, Crane Corporation signed a 5-year noncancelable lease for equipment. The terms of the lease called for Crane to make annual payments of $199000 at the beginning of each year for 5 years beginning on January 1, 2021 with the title passing to Crane at the end of this period. The equipment has an estimated useful life of 7 years and no salvage value. Crane uses the straight-line method of depreciation for all of its fixed assets. Crane accordingly accounts for this lease transaction as a finance lease. The lease payments were determined to have a present value of $843704 at an effective interest rate of 9%. In 2021, Crane should record:.
a. interest expense of $57,058 and depreciation expense of $107,225.b. interest expense of $75,058 and depreciation expense of $107,225.c. interest expense of $44,764 and depreciation expense of $107,225.d. interest expense of $62,764 and depreciation expense of $107,225.