Ava Ltd (Lessor) and Max Ltd (Lessee) enter into a lease agreement for a tractor on 30 June 2019. On that date, the tractor had a fair value of $111,874.

Details of the lease agreement are as follows:

Lease term	4 years
Annual Rental Payment in arrears starting from 30 June 2020	$32,000
Economic life of the Tractor	6 years
Estimated Residual value at the end of the lease term	$10,000
Residual Value guaranteed by the lessee	$8,000
Interest Rate implicit in the lease	6%

The annual rental payment includes $2,000 that is reimbursed to the lessor to do the maintenance and insurance for the tractor on behalf the lessee. The lessee intends to return the tractor to the lessor at the end of the lease term.

The lease payment schedule for the lessee is shown below:

Date	Lease Payment	Interest Expense	Liability Reduction	Liability Balance
30-Jun-19				$110,290
30-Jun-20	30,000	$6,617	23,383	$86,907
30-Jun-21	30,000	$5,214	24,786	$62,122
30-Jun-22	30,000	$3,727	26,273	$35,849
30-Jun-23	38,000	$2,151	35,849	$0

Required:

Based on the above lease payments schedule, prepare journal entries in the books of the lessee from the start of the lease until the year ended 30 June 2022. (10 Marks).