Lindor Limited enters into a contract with Property Net Limited for the lease of three floors of an

office building. The exact floors are specified in the contract and Property Net Limited is not

permitted to relocate tenants to other floors of the building.

The commencement date of the lease is $2$

nd January $2022$ and the duration of the lease is for five

years with the option to extend for a further five years. Lindor Limited is reasonably certain to

exercise the option to extend the lease.

The lease payments are R$50000$ per annum during the initial term and R$55000$ per annum during

the optional term, all payable in advance.

Lindor Limited incurred initial direct costs of R$20000,$ comprising R$15000$ as compensation to the

tenant formerly occupying the three floors and R$5000$ as agents commission. These are paid on $2$

January $2022.$ Property Net Limited agrees to reimburse the R$5000$ agents commission.

The interest rate implicit in the lease is not readably determinable. Lindor Limited $\text{'}$s incremental

borrowing rate is $5\%$ per annum. The following present value table is provided:

Details PV Factor

Present value of annuity in advance of R$1$ for years $1$ to $5,$ discounted at $5\%4\mathrm{.}5459$

Present value of annuity in advance of R$1$ for years $6$ to $10,$ discounted at $5\%3\mathrm{.}5619$

Required:

$1.$ Calculate the amount to record as the initial lease liability AND right of use asset $(7)$

$2.$ Prepare the journal entries in the accounting records of Lindor Limited for the year ended $31$

December $2022(18$