On january 1, 2018, rick’s pawn shop leased a truck from chumley 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 3-year extension option. annual lease payments are $14,500 due on december 31 of each year, calculated by the lessor using a 6% interest rate. the agreement is considered an operating lease. (fv of $1, pv of $1, fva of $1, pva of $1, fvad of $1 and pvad of $1) (use appropriate factor(s) from the tables provided.)
prepare the journal entry, if any, at the beginning of the third year for the lessee to account for the reassessment.
record the improvements to the truck by rick's.