Use the Following Information for Questions 104 and 105

Use the following information for questions 104 and 105.
On January 2, 2015, Hernandez, Inc. signed a ten-year noncancelable lease for a heavy duty drill press. The lease stipulated annual payments of $200,000 starting at the beginning of the first year, with title passing to Hernandez at the expiration of the lease. Hernandez treated this transaction as a capital lease. The drill press has an estimated useful life of 15 years, with no salvage value. Hernandez uses straight-line depreciation for all of its plant assets. Aggregate lease payments were determined to have a present value of $1,200,000, based on implicit interest of 10%.
-In a lease that is recorded as a sales-type lease by the lessor, interest revenue

A) should be recognized in full as revenue at the lease's inception.
B) should be recognized over the period of the lease using the straight-line method.
C) should be recognized over the period of the lease using the effective interest method.
D) does not arise.