James Ltd purchased a mining drill for its fair value of $43,300 and then leased it to Shipton Ltd on 30 June 2022. Shipton Ltd spent $417 in negotiating the lease agreement. The estimated economic life of the mining drill is 5 years, after which time a residual value is expected to be $2,000. According to the lease agreement, the length of lease is 4 years and the commencement date is 30 June 2022. Annual lease payment, payable 30 June each year commencing 30 June 2022, is $13,000. Residual value at the end of the lease term is $11,000. Residual value guarantee by Shipton Ltd is $9,000. Interest rate implicit in the lease is 6%. The lease is cancellable, but only with the permission of James Ltd. Insurance and maintenance costs, which amount to $3,000 per year, are paid by James Ltd and will be reimbursed by Shipton Ltd by including it in the annual lease payment of $13,000. The mining drill will be depreciated on a straight-line basis. It is expected that Shipton Ltd will return the mining drill at the end of the lease to James Ltd.

Required

1. Calculate the initial direct costs incurred by James Ltd to negotiate the lease agreement.
2. Provide the journal entries for Shipton Ltd to account for the lease for the years ended 30 June 2022 and 30 June 2023.
3. Provide the journal entries for James Ltd to account for the lease for the years ended 30 June 2022 and 30 June 2023.