As of 1 July 2022, Scarlett Ltd leases a building from Rhett Ltd. The building has a fair value at 1 July 2022 of $1 972 000. The lease agreement details are as follows. 10 years 1 July 2022 Length of lease Commencement date Annual lease payment, payable 30 June each year commencing 30 June 2023 Estimated economic life of the building Residual value at the end of the lease term Residual value guarantee by Scarlett Ltd Interest rate implicit in the lease $350 000 10 years $20 000 $14000 10% The lease is cancellable, but a penalty equal to 50% of the remaining lease payments is applicable on cancellation. Scarlett Ltd incurred $1331 to negotiate and execute the lease agreement. All insurance and maintenance costs are paid by Rhett Ltd and are expected to amount to $30 000 per year and will be reimbursed by Scarlett Ltd by being included in the annual lease payment of $350 000. The building is to be depreciated on a straight-line basis. Required 1. Calculate the initial direct costs incurred by Rhett Ltd to negotiate and execute the lease agreement. 2. Indicate the amounts recorded as right-of-use asset and lease liability by Scarlett Ltd and the amount recorded as lease receivable by Rhett Ltd at the beginning of the lease in their respective books. 3. Prepare the journal entries to account for the lease in the books of Scarlett Ltd for the year ended 30 June 2023. 4. Calculate the current and non-current lease liability as of 30 June 2023 relating to the lease. 5. Prepare the journal entries to account for the lease in the books of Rhett Ltd for the year ended 30 June 2023