On 1 July 2019, La Ltd leased a plastic-moulding machine from Trobe Ltd. The machine cost Trobe Ltd $130000 to manufacture and had a fair value of $154109 on 1 July 2019 The lease agreement contained the following provisions.

Lease term 4 years

An initial payment is paid in advance on 1 July 2019: $40,000

Annual payment of $40,000 to be paid on 30 June 2020, 30 June 2021 and 30 June 2022

Residual value at the end of the lease term$15,000

Residual guaranteed by lesseeNil

The lease is non-cancellable

The economic useful life of the machine is: 6 years

Interest rate implicit in lease8%

Required:

a) Calculate the present value of lease liability amount as at 1 July 2019.

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