Universal Inc. signed a contract to lease equipment for a 4-year term on January 1, 2020, for $20,000 annually beginning immediately. The lease included a purchase option at the end of the lease for $8000, that at the commencement of the lease, Universal did not believe would exercise. However, on December 31, 2021, two years later, circumstances had changed causing Universal to now reasonably expect to exercise the option. Universal's borrowing rate at lease commencement did not reflect the purchase option. On December 31, 2021, the lease liability and right-of-use asset had balances of $37,188 and $37,233, respectively. What is the adjusted lease liability on December 31, 2021?

Intermediate Accounting: Second Edition

Michelle Hanlon, Leslie Hodder