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 for three years.

Rick$$s had no significant economic incentive as of the beginning of the lease to exercise the three$-$year extension option. Annual lease payments are $$10,000$ due on December $31$ of each year, calculated by the lessor using a $5\%$ discount rate.

The expected useful life of the asset is nine years, and its fair value is $$75,000.$

Assume that at the beginning of the third year, January $1,2026,$ Rick$$s had made significant improvements to the truck whose cost could be recovered only if it exercises the extension option, creating an expectation that extension of the lease was $$reasonably certain.$$

The relevant interest rate at that time was $6\%.$

Prepare the journal entry, if any, on January $1$ and on December $31$ of the third year, $2026$ for the lessee to account for the reassessment.Prepare the journal entry, if any, on January $1$ and on December $31$ of the third year, $2026$ for the lessee to account for the

reassessment.

Note: If no entry is required for a transaction$/$event$,$ select $"$No journal entry required" in the first account field. Round your

intermediate and final answers to nearest whole dollar.

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