On 1 March 20X7, a company enters into a lease agreement to rent equipment with a fair value of $850,000.

The lease terms are as follows:

• The lease term commenced on 1 March 20X7.
• The lease term is 5 years, there is no renewal option.
• The economic life of the equipment is 7 years.
• Annual lease payments are $225,000, due at the beginning of each lease year. Included in this payment is $30,000 for maintenance services.
• The asset reverts back to the lessor at the end of the lease.
• The unguaranteed residual value is $130,000 at the end of the lease term.
• The lessees year end is 31 December.

Other important notes:

The lessees incremental borrowing rate is 7%. The rate implicit in the lease is 12.71%.

Required:

Prepare the journal entry to record the lease on 1 March 20X7, by the lessee, using IFRS