Exercise 10.15 Lease classification, lease accounting On 1 July 2022, Connor Ltd purchased equipment for its fair value and then leased it to Violet Ltd, incurring $2 548 in costs to prepare and execute the lease document. Violet Ltd incurred $1 935 in costs to negotiate the agreement. The equipment is expected to have an economic life of 6 years, after which time it will have a residual value of $6 000. The lease agreement details are as follows. Length of lease Commencement date Annual lease payment, payable 1 July each year commencing 1 July 2022 Residual value at the end of the lease term, of which 50% is guaranteed by Violet Ltd Interest rate implicit in the lease 5 years 1 July 2022 $15.000 $12.000 6% All insurance and maintenance costs are paid by Connor Ltd and amount to $3000 per year and will be reimbursed by Violet Ltd by being included in the annual lease payment of $15 000. The equipment will be depreciated on a straight-line basis. It is expected that Violet Ltd will return the equipment to Connor Ltd at the end of the lease. Required 1. Calculate the fair value of the leased equipment at 1 July 2022. 2. Prepare the journal entries to account for the lease in the books of Violet Ltd for the year ended 30 June 2023. 3. Prepare the journal entries to account for the lease in the books of Connor Ltd for the year ended 30 June 2023.