On 1 July 2020, Table Ltd leased equipment from Chair Ltd. The following are details of the equipment and the lease contract:

On 1 July 2020 equipment has a fair value of $110,000 (at fair value in Chair Ltds accounts)

Lease term is 5 years, useful life of the equipment is 6 years, and Table Ltd will return the equipment at the end of the lease term

Lease payments are in advance and will be paid on 1 July of each year, starting 1 July 2020, with $24,000 as the annual payment

Residual value of the equipment at the end of the lease term is $8,000, with Table Ltd guaranteeing 75% of the residual value

The interest rate implicit in the lease arrangement is 6%.

In setting up the lease arrangement Table Ltd incurred costs of $2,354, while Chair Ltd incurred costs of $3,141.

Required:

a) Prepare the necessary journal entries for Table Ltd on 1 July 2020.

b) Calculate interest and depreciation expense incurred on 30 June 2021 for Table Ltd.

b) Prepare the necessary journal entries for Chair Ltd on 1 July 2020.