Farrell plc is a rapidly growing manufacturing company but because of cash flow difficulties has decided to acquire one of its tangible non -current assets under a lease rather than purchasing it outright. On 1st April 20X1 the company entered into a contract to lease a machine from Dex Leasing. The contract contained the following terms: i) Farrell plc acquired exclusive rights to use of the machine and had to bear all maintenance and insurance costs; ii) The contract is non-cancellable and the primary period is for four years. A rental payment of 10,000 is payable on the 31st March of each of these four years. There is an option to extend the lease for a further two years beyond the initial four year period. It is unclear whether Farrell plc is likely to extend the lease beyond four years. iii) The rate of interest implicit in the lease is 15% and thus the net present value of the lease payments is 28,550, being also the cash cost of the machine. Farrell plc expects the useful economic life of the asset to be ten years and uses the straight line method of depreciation. Farrell plc has no other leased assets and its accounting year end is 31st March 20X2. REQUIRED: Under IFRS 16 Leases a) Show the double entry for the initial accounting for this lease. b) Compile the lease liability table showing all years of the lease term. c) Show how the lease liability would be split between current and non-current at the end of each year of the lease term. d) Calculate the carrying value of the right of use asset at the end of each year of the lease term, and the annual depreciation charge. e) What would be the effect of the lease on the cash flow statement each year?