On 1 July 2019, Harry Ltd leased a machinery from Potter Ltd. The finance lease agreement contained the following provisions:

The lease term is for 3 years, starting on

1 July 2019

The lease is non-cancellable

Annual lease payment, payable on 30thJune each year

165,000

The estimated useful life of the machinery

5 years

Estimated residual value of the machinery at end of useful life

$30,000

Interest rate implicit in the lease

6 %

There is a bargain purchase option that Harry Ltd will be able to exercise at the end of the lease term for $60,000. The annual lease payment includes $15,000 representing payment to the lessor for insurance and maintenance of the machinery.

Required:

a)Calculate thepresent value lease liabilityamount as at 1 July 2019.

b)Prepare the journal entries in relation to the lease for the year ending 30 Jun 2020.