On January 1 . Blalock Company as lessee signed a ten-year noncancelable lease for a machine with annual payments of $60,000 . The first payment was also made on January 1 . Blalock appropriately treated this transaction as a capital lease. The ten lease payments have a present value of $405,000 at January 1 . based on implicit interest of 1 . percent. For the first year, Blalock should record
interest expense of
a. $0.
b. $6,000.
c. $34,500.
d. $40,500.
C
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