Dhapa On January 1, 2024, Rick's Pawn Shop leased a truck from Corey Motors for a six-year period with an option to extend the lease forthree years.• Rick's had no significant economic incentive as of the beginning of the lease to exercise the three-year extension option. Annuallease payments are $15,000 due on December 31 of each year, calculated by the lessor using a 6% discount rate.• The expected useful life of the asset is nine years, and its fair value is $112,500.Assume that at the beginning of the third year, January 1, 2026, Rick's had made significant improvements to the truck whosecost could be recovered only if it exercises the extension option, creating an expectation that extension of the lease was"reasonably certain."• The relevant interest rate at that time was 7%.Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1. PVA of $1. FVAD of $1 and PVAD of $1)Required:1. Prepare the journal entry, if any, on January 1 and on December 31 of the third year, 2026 for the lessee to account for thereassessment.2. Prepare the journal entry, if any, on January 1 and on December 31 of the third year, 2026 for the lessor to account for thereassessment.Complete this question by entering your answers in the tabs below.Required 1 Required 2Prepare the journal entry, if any, on January 1 and on December 31 of the third year, 2026 for the lessee to account for thereassessment.Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your intermediateand final answers to nearest whole dollar.View transaction listView journal entry worksheet

Name: Dhapa On January 1, 2024, Rick's Pawn Shop leased a truck from Corey M
Uploaded: 2024-03-04T10:43:15.000Z
Channel: Bartleby
Description: Dhapa On January 1, 2024, Rick's Pawn Shop leased a truck from Corey Motors for a six-year period with an option to extend the lease forthree years.• Rick's had no significant economic incentive as of the beginning of the lease to exercise the three-