On 1 January 2013, Ford Lease Co. leased a truck with an estimated economic life of five years to Cubic-Haul for a period of 5 years. The normal selling price of the truck was $47,600. Ford Lease Co. incurred costs of $35,000 in manufacturing the truck. Cubic-Haul agreed to pay monthly rentals of $1,000 at the beginning of each month and was responsible for all maintenance, insurance, etc. Assume that the unguaranteed full residual value of the truck at the end of the lease is $4,000. The interest rate implicit in the agreement is 1% per month.

Required: Applying AASB117, explain how this lease should be accounted for in the financial statements of Cubic-Haul and prepare the general journal entries relating to the lease for the months of January and February in the books of Cubic-Haul.