Big Karoo Limited, a specialized leasing company, enters into a lease contract with Baloyi Limited for the lease of a construction crane for a period of three years. The commencement date of the lease is $1$ July $2014.$ The lease is non$-$cancellable and the residual value of the crane at the end of the lease is expected to be negligible. The cost of the crane to Big Karoo Limited is R$270000$ and the accumulated depreciation at $30$ June $2014$ is R$120000.$

The lease rentals are R$60317$ per year, payable annually in arrears. Big Karoo Limited incurs commissions and legal fees of R$7500$ in setting up the contract. The interest rate implicit in the lease is $7\mathrm{.}275\%.$ The PV factor of an annuity in arrears of R$1$ for three years discounted at $7\mathrm{.}275\%$ is $2\mathrm{.}6112.$

 

 

Required:

a$.$ Calculate the gross investment in the lease, the net investment in the lease, and the unearned finance income.

b$.$ Prepare the journal entries in the accounting records of Big Karoo Limited showing the gross receivable and unearned finance income.

c$.$ Prepare the journal entry in the accounting records of Big Karoo Limited showing the net receivable