Delta Dredge P/L enters into a lease (to a lessee) agreement and leases dredging equipment to Wollongong council keep a river mouth clear for boating. The lease consists of the following;

date of inception: 1/7/10

duration of lease: 4yrs

life of asset: 5 yrs

residual value: $120000

lease payments: 165000 annual includes $18000 for maintenance and

insurance costs per annum. $90000 (added to final payment)

interest: 12.5%

fair value: $498016

required: check the rate is correct against FV

do journal entries.