On 1 January 20X8, a lessee acquires new equipment, with a fair value of £730,000, by entering into a ten-year lease. Lease payments are £90,000 per annum and all payment are made at the end of the period (i.e. first payment is made 31 December 20X8). To enter into the lease, the lessee incurred initial direct costs of £10,000.

Required:

Assuming the interest rate implicit in the lease is 4 per cent, prepare extracts of the financial statements for the year ended 31 December 20X8.