10.12 Lease classification, lease accounting * LO2, 3, 4 On 30 June 2022, Harper Ltd purchased machinery for its fair value of $42 500 and then leased it to Lee Ltd. Lee Ltd incurred $349 in costs to negotiate the lease agreement. The machine is expected to have an economic life of 5 years, after which time it will have a residual value of $2500. The lease agreement details are as follows. 4 years 30 June 2022 Length of lease Commencement date Annual lease payment, payable 30 June each year commencing 30 June 2022 Residual value at the end of the lease term Residual value guarantee by Lee Ltd Interest rate implicit in the lease The lease is cancellable, but only with the permission of Harper Ltd. $12000 $10 000 $8 000 8% All insurance and maintenance costs are paid by Harper Ltd and amount to $2000 per year and will be reimbursed by Lee Ltd by being included in the annual lease payment of $12000. The machinery will be depreciated on a straight-line basis. It is expected that Lee Ltd will return the machinery at the end of the lease to Harper Ltd. Required Calculate the initial direct costs incurred by Harper Ltd to negotiate the lease agreement. Prepare the journal entries to account for the lease in the books of Lee Ltd for the years ended 30 June 2022 and 30 June 2023