A company buys an oil rig for $2,000,000 on January 1, 2012. The life of the rig is 10 years and the expected cost to dismantle the rig at the end of 10 years is $400,000 (present value at 10% is $154,220). 10% is an appropriate interest rate for this company. What expense should be recorded for 2012 as a result of these events?

a. Depreciation expense of $240,000

b. Depreciation expense of $200,000 and interest expense of $15,422

c. Depreciation expense of $215,420 and interest expense of $15,422

d. Depreciation expense of $200,000 and interest expense of $40,000