On 1 July 2017, Webster Motors Ltd acquired equipment under a four-year finance lease agreement. The present value of the lease payments is $431,213. It has an estimated useful life of five years and an estimated residual value of $31,213. The implicit rate of interest on the lease was 8% per annum. The lease involved five payments, an initial payment of $100,000 and four annual payments on 30 June each year of $100,000.

Webster Motors Ltd will retain the equipment at the end of the lease.

Required:

1. You are the accountant at Webster Motors Ltd and one of the major shareholders has asked you to clarify the reasons for the way the lease is reported in the Financial Statements. Write a brief comment for the shareholder explaining the treatment of the lease, including the effect of the lease on any related items in the income statement and balance sheet of Webster Motors Ltd.
2. Complete a lease schedule for the four years up to and including 30 June 2021.
3. Record the necessary general journal entries relating to the lease in the year ending 30 June 2019. Narrations are not required.
4. Prepare the Income Statement for the year ended 30 June 2019.
5. Prepare the Balance Sheet extract as at 30 June 2019.