Corporate accounting

Southpoint Lid enters into a non-cancellable five-year lease agreement with Northpoint Lid on 1 July 2023. The lease is for an item of machinery At the inception of the lease, it has a fair value of $1,294.384 The expected economic life of the machinery is six years, after which time it will have an expected residual value of $210,000. There is a bargain purchase option that Southpoint Lid will be able to exercise at the end of the fifth year for $280,000. There will be five annual payments of $350,000, the first being made on 30 June 2020 Included with $350,000 lease payments is an amount of $35,000 representing payment to the lessor for the insurance maintenance of the equipment The equipment is depreciated on a straight-line basis Note 1 Use an implicit interest rate of 12% 2 PVIF@12% at year 1 - 5 > 3 6048 3. PVIF@ 12% at year 5 > 0.5674. Required: Prepare the journal entries in the books of Southpoint Lid for the years ending 30 June 2024 and 30 June 2025