(a) Carbery plc who operate a copper mine in Munster leased drilling equipment during 2018. Carbery plc prepares its financial statements to 31 December each year. A review of the year-end books at 31 December 2018 revealed that the drilling equipment lease had not yet been recorded. The drilling equipment has a useful economic life of 5 years. The lease term is five years with an option for Carbery plc to continue leasing the drilling equipment after the fiveyear primary term at a rent below market rent. The lease agreement requires 5 annual payments of 100,000, and the first annual payment was made on 1 January 2018 with subsequent payments being due annually thereafter. The cash price (fair value) of the leased drilling equipment is 471,700 on 1 January 2018. Carbery depreciates the drilling equipment on a straight-line basis. The rate on interest implicit in the lease is 3%. Required 1. Prepare a schedule showing the computation of the interest expense for each year of the 5 year lease.. (6 marks) 2. Give the journal entries for Carbery plcs books for the first two years of the lease. (3 marks) 3. Show the lease liability T account for the first two years of the lease. (3 marks) 4. Show how Carbery plc would account for the above lease in accordance with IFRS 16, Leases in the Statement of Profit or Loss and Other Comprehensive Income and the Statement of Financial Position for the years ending 31 December 2018 and 2019. (4 marks) (b) A lessor has suggested that a lease with a term of four years could be drawn up with a minimum payment period of one year and an option to review. The lessor alleges that this would mean the lease could be kept off balance sheet. Discuss this suggestion. Page 3 of 10 (5 marks) (c) Give two reasons why leasing became a popular form of financing for companies. (4 marks)