Cuestion 5 (25 marks) lease. On 31 December 2018, Eagle Limited (EL) experienced cash flow problems and entered into immediately lease it back under the following terms and conditions: Under the agreement, EL would sell its headquarters building to PFL at its market value and 2 sale and leaseback agreement with a leasing company, Public Finance Limited (PFL). Lease term: 12 years Lease commencement: 31 December 2018 Annual lease payment: $900,000 payable annually in arrears Carrying amount of the building at 31 December 2018: 58,600,000 Fair value of building at 31 December 2018: $9,800,000 Implicit interest rate: 10% The sale and leaseback arrangement of the building qualifies as a sale under HKFRS 15. EL also incurred $50,000 initial direct cost in negotiating and signing the lease arrangement. (6 marks) Required: (a) Explain how EL (the seller-lessee) and PFL (the buyer-lessor) should classify for the above lease transaction respectively. (b) Determine the initial measurement of the Right-of-use asset, lease liability and gain on sale of building for EL in accordance with HKFRS 16. Show your workings clearly. Express your answer to the nearest thousand dollar. (6 marks) (7 marks) (c) Prepare journal entry to record the above lease transaction on 31 December 2018 (6 marks) (d) Prepare the extracts of the statement of financial position as at 31 December 2018 for EL for the relevant items related to the above lease transactions. [END OF SECTION B]