Mack Corp. (lessee) entered into a 4-year operating lease on January 1, Year 1. Annual lease payments of $25,000 are due on December 31 each year, and a down payment of $25,000 is due at the lease commencement date. Initial direct costs related to the lease are $5,000, and the lessee knows that the rate implicit in the lease is 6%.

The present value of 1 at 6% for 4 years is 0.792.

The present value of an ordinary annuity at 6% for 4 years is 3.465.

What is the amount of the right-of-use asset initially recorded by Mack Corp.? Please show solution

A.$91,625

B.$86,625

C.$116,625

D.$111,425