Exhibit 20-2 on January 1, 2014, Mary Company Leased Equipment

Exhibit 20-2 On January 1, 2014, Mary Company leased equipment, signing a five-year lease that requires annual lease payments of $20,000. The lease qualifies as a capital lease. The payments are made at year-end, and the first payment will be made at December 31, 2014. In addition, Mary guarantees the residual value to be $8,000 at the end of the lease term. Mary correctly uses the lessor's implicit interest rate, which is 12%. The present value factors for five periods at 12% are as follows:
-Refer to Exhibit 20-2. What is the correct interest expense for the year ending December 31, 2015, for the lease obligation? (Round answers to the nearest dollar.)

A) $20,000
B) $10,804
C) $ 7,900
D) $ 7,290