Rover Company leases certain heavy equipment from the London Leasing Company under an eight-year lease. The economic life of the equipment is ten years. No residual value will remain at the end of that period. The lease agreement calls for eight annual payments of £150,000 beginning at the inception of the lease. The first payment is to be made on 1 January 20X1. Each payment thereafter falls to be made on the first day of the year. The fair value of the equipment is £1 million. Rover Company depreciates similar assets by the straight-line method.

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Show how the transaction would be recorded in Rover Company’s final accounts.