CA Ltd leases some parcels of land from BHP for a period of 9 years at a time. The lease agreement can be cancelled, but a significant penalty will be incurred by CA Ltd. The lease payments required include a payment up-front of $290 000, followed by another 8 payments of equal value at the end of every year up to the end of the eighth year. The interest rate implicit in the lease is 10%. There is no guaranteed or unguaranteed residual value at the end of the lease period.

Required:

Prepare the journal entries for CA Ltd to record the initial recognition of lease related assets and liabilities with the up-front payment, and interest expense and depreciation for two years under AASB 16/IFRS 16.