Deliveries Ltd leased a truck from a truck dealer, City Vans Ltd$.$ City Vans Ltd acquired the truck at a cost of $$180000.$ The truck will be painted with Deliveries Ltd$$s logo and advertising, and the cost of repainting the truck to make it suitable for another owner four years later is estimated to be $$40000.$ Deliveries Ltd plans to keep the truck after the lease but has not made any commitment to the lessor to purchase it$.$ The terms of the lease are as follows:

Date of entering lease: $1$ July $2023.$

Duration of lease: four years.

Life of leased asset: five years, after which it will have no residual value.

Lease payments: $$100000$ at the end of each year.

Interest rate implicit in the lease: $10$ per cent.

Unguaranteed residual: $$50000.$

Fair value of truck at inception of the lease: $$351140.$

REQUIRED

Demonstrate that the interest rate implicit in the lease is $10$ per cent.

Prepare the journal entries to account for the lease transaction in the books of the lessor, City Vans Ltd$,$ at $1$ July $2023$ and $30$ June $2024.$

Prepare the journal entries to account for the lease transaction in the books of the lessee, Deliveries Ltd$,$ at $1$ July $2023$ and $30$ June $2024.$

On $30$ June $2027$ Deliveries Ltd pays the residual of $$50000$ and purchases the truck. Prepare all journal entries in the books of Deliveries Ltd for $30$ June $2027$ in relation to the termination of the lease and the purchase of the truck.