11..X Ltd entered into a lease agreement on the following terms:

Cost of leased asset £100,000 Lease term 5 years Rentals six-monthly in advance £12,000 Anticipated residual on disposal of the assets at end of lease term £10,000 Lessee’s interest in residual value 97%

Economic life 8 years Inception date 1 January 20X4 Lessee’s financial year-end 31 December Implicit rate of interest is applied half-yearly 4.3535%

Required:

Show the income statement entries for the years ended 31 December 20X4 and 20X7 and balance sheet extracts at those dates.