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$$s had no significant economic incentive as of the beginning of the lease to exercise the three$-$year extension option. Annual lease payments are $$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$$s had made significant improvements to the truck whose cost could be recovered only if it exercises the extension option, creating an expectation that extension of the lease was $$reasonably certain.$$

The relevant interest rate at that time was $7\%.$