On 1 July 2019. Sky Ltd purchased equipment and then leased it to Blue Ltd, Blue Ltd incurred $1 200 in costs to negotiate the lease agreement. Sky Ltd incurred $1 500 in initial costs to prepare and execute the lease agreement. The lease agreement details are as follows Lease Term 6 years Annual rental payments (payable in advance on 1 July each year) $33 000 Residual value at the end of the lease term $10 000 Residual value guarantee $ 9000 $2 000 Amount of the residual value guarantee that is expected to be payable by the lessee at the end of the lease term Interest rate implicit in the lease 496 Blue Ltd expects to return the equipment to Sky Ltd at the end of the 6-year lease term. The annual rental payments include an amount of $3,000 to cover the cost of maintenance and repairs that were arranged and paid for by Sky Ltd. Required: a)Determine the fair value of equipment on 1 July 2019. Show all your workings. (5 marks) b) Assuming that the lease is a finance lease from the perspective of Sky Ltd, prepare the journal entries for Sky Ltd from 1 July 2019 to 30 June 2020. (12 marks) On 1 July 2019. Sky Ltd purchased equipment and then leased it to Blue Ltd, Blue Ltd incurred $1 200 in costs to negotiate the lease agreement. Sky Ltd incurred $1 500 in initial costs to prepare and execute the lease agreement. The lease agreement details are as follows Lease Term 6 years Annual rental payments (payable in advance on 1 July each year) $33 000 Residual value at the end of the lease term $10 000 Residual value guarantee $ 9000 $2 000 Amount of the residual value guarantee that is expected to be payable by the lessee at the end of the lease term Interest rate implicit in the lease 496 Blue Ltd expects to return the equipment to Sky Ltd at the end of the 6-year lease term. The annual rental payments include an amount of $3,000 to cover the cost of maintenance and repairs that were arranged and paid for by Sky Ltd. Required: a)Determine the fair value of equipment on 1 July 2019. Show all your workings. (5 marks) b) Assuming that the lease is a finance lease from the perspective of Sky Ltd, prepare the journal entries for Sky Ltd from 1 July 2019 to 30 June 2020. (12 marks)