Question $4-2$

Firm A signed a lease contract with an equipment dealer on January $1,2022.$ Firm A needs to make a rental payment of $$80,000$ at the beginning of each year, with the first payment due immediately. The lease contract has a non$-$cancellable lease term of five years. Assume a $10\%$ discount rate.

Required:

i$)$ Determine the amount of right$-$of$-$use assets and lease liability Firm A should recognize on January $1,2022$;

ii$)$ Determine the amount of interest expense relating to this lease Firm A should recognize for year $2022$;

iii$)$ Suppose that the lease contract contains a renewal option, allowing firm A to renew the lease contract for another five years with an annual rental payment of $$30,000$ at the end of the above non$-$cancellable lease term, how will this affect the recognition of right$-$of$-$use assets and lease liability by Firm A on January $1,2022?$