What amount of depreciation expense should the lessee recognize for Year One?

On January 1, Year One, a company leases equipment for 8 years although the equipment has a life of 10 years. At the end of that time, title to this property will be conveyed to the lessee. Payments are $10,000 per year on January 1 with the first one made immediately. The present value of these payments at the lessee’s incremental borrowing rate of 10 percent per year is assumed to be $58,000. What amount of depreciation expense should the lessee recognize for Year One?
$0
$5,800
$6,000
$7,250

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