On 1 July 2014, Torrens leased a machine to Lofty Ltd (Lofty), incurring $1,200 in costs to prepare and execute the lease document. Lofty incurred $650 in costs to negotiate the agreement. The machine is expected to have an economic life of 5 years, after which time it will have a residual value of $950. The lease agreement details are as follows. Length of lease 4 years Commencement date 1 July 2014 Annual payments, payable 1 July commencing 1 July 2014 $20,000 Residual value at the end of lease term (70% guaranteed by Lofty) $8,000 Implicit interest rate in the lease 8% Maintenance has been done once a year at the end of June by Torrens. Lofty pays the cost of maintenance amounted to $4,000 per year, which is included in the annual lease payment of $20,000. Straight-line method was applied for depreciation. It was expected that Lofty would return the machine to Torrens. The leased machine was sold at price of $7,000 once it is returned to Torrens at 30 June, 2018. b) Prepare the journal entries for lessee on 1st July 2014, 30th June, 2015, 1 st July 2015 and 30th June, 2018.

1/7/14 Dr. Right-of-use asset 62000 Cr. Lease liability 45350 Cr. Cash 16650 (+1)

Dr. Prepaid maintenance expense 4000 Cr. Cash 4000 (+1)

30/06/15 Dr. Interest expense 3628 Cr. Lease liability 3628 (+1)

Dr. Maintenance expense 4000 Cr. Prepaid maintenance expense 4000 (+1)

Depreciation expense: (62000-5600)/4=14100 Dr. Depreciation expense 14100 Cr. Acc. Depreciation 14100 (+1)

1/7/15 Dr. Lease liability 16000 Cr. Cash 16000 (+1)

Dr. Prepaid maintenance expense 4000 Cr. Cash 4000 (+1)

30/06/18 Dr. Depreciation expense 14100 Cr. Acc. Depreciation 14100 (+1)

Dr. Acc. Depreciation 56400 Cr. Right-of-use asset 56400 (+1)

Dr. Interest expense 415 Cr. Lease liability 415 (+1)

Dr. Lease liability 5600 Cr. Right-of-use method 5600 (+1)

Dr. Maintenance expense 4000 Cr. Prepaid maintenance expense 4000 (+1)

Dr. Reimbursement expense 700 Cr. Cash/ Reimbursement payable 700

can someone pls tell me how reimbursement expense become 700? thank you