Just explain why for the first question, for lessee using $3600 and for lessor using $7200 and how to get the MLP for 30 June 2018 for both lessee and lessor.

And the second question, why using $12000*0.6209 for pv of UGRV? Where does this $12000 come from?

Gran Ltd has entered into an agreement to lease a D9 bulldozer to Torino Ltd. The lease agreement details are as follows: Length of lease 5 years 1 July 2013 Commencement date $8000 Annual lease payment, payable 30 June each year commencing 30 June 2014 $34 797 Fair value of the bulldozer at 1 July 2013 Estimated economic life of the bulldozer 8 years $2 000 Estimated residual value of the plant at the end of its economic life Residual value at the end of the lease term, of which 50% is guaranteed by Torino Ltd $7 200 Interest rate implicit in the lease 9% The lease is cancellable, but a penalty equal to 50% of the total lease payments is payable on cancellation. Torino Ltd does not intend to buy the bulldozer at the end of the lease term. Gran Ltd incurred $1000 to negotiate and execute the lease agreement. Gran Ltd purchased the bulldozer for $34 797 just before the inception of the lease. Required 1. State how both companies should classify the lease. Give reasons for your answer. 2. Prepare a schedule of lease payments for Torino Ltd. 3. Prepare a schedule of lease receipts for Gran Ltd. 4. Prepare journal entries to record the lease transactions for the year ended 30 June 2014 in the records of both companies. 1. Lease classification The lease should be classified by both parties as a finance lease as substantially all of the risks and rewards incidental with ownership of the bulldozer have been transferred from the lessor to the lessee as indicated by the following: LESSEE