On january 1, espinoza moving and storage leased a truck for a four-year period, at which time possession of the truck will revert back to the lessor.

annual lease payments are $10,000 due on december 31 of each year, calculated by the lessor using a 5% discount rate.

if espinoza's revenues exceed a specified amount during the lease term, espinoza will pay an additional $4,000 lease payment at the end of the lease.

espinoza estimates a 60% probability of meeting the target revenue amount.

what amount should be added to the right-of-use asset and lease liability under the contingent rent agreement?

None. The right-of-use will be the present value of the lease payment. The variable additional payment is not considering a lease payment for the accounting.

Explanation:

As this payment are variable and uncertain, the accounting will not include this as lease payment. This variable does not influence the right-of-use assets and liability

rational decision making is a multi-step process for making choices between alternatives. the process of rational decision making favors logic, objectivity, and analysis over subjectivity and insight. the word “rational” in this context does not mean sane or clear-headed as it does in the colloquial sense.

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