On 30 June 2019, Air Ltd entered into a 5 year finance lease for the right to use equipment. The fair value of the equipment at that inception of the lease is $1 200 000. Lease payments are made in advance on 30 June each year. An extract of the lease repayments schedule is as follows: AIR LTD Extract of Lease Payments Schedule Minimum lease Interest payments expense Reduction in liability Balance of liability 30 June 2019 $ 1143 131 30 June 2019 $ 160 000 - $ 160 000 983 131 30 June 2020 160 000 98 313 61 687 921 444 30 June 2021 160 000 92 144 67 856 853 588 Required: a) Very briefly, explain why service contracts cannot be capitalised. (2 marks) b) Based on the lease repayment schedule, prepare the journal entries of the Air Ltd to account for the finance lease from 30 June 2019 to 30 June 2020 (narrations are not required). (9 marks) c) Scream Ltd bought 100% of issued shares in Quiet Ltd on 1 July 2020. The following transactions occurred between Scream and Quiet during the year ended 30 June 2021: During the year-ending 30 June 2021, Quiet sold inventory to Scream for $80,000. This inventory had cost Quiet $74,000. By the end of the year ending 30 June 2021, Scream had sold one-third of the inventory to Pixel Ltd for $72,000 and the remaining two-thirds of the inventory was still held by Scream. Assume the corporate tax rate is 30% Required: For the purposes of consolidated financial statements, discuss the reason as to the need for the adjustment journal entries, for the above intra-group transactions, between the two entities and prepare the consolidation journal entries for the above transaction for the year ending 30 June 2021. (5 marks) 2% 3% 4% 5% 1956 7% 1 8% 0.990 956 0.980 0.971 1006 0.962 0.952 0.943 0.035 0.926 2 0.917 8.909 1.970 1.942 1.913 1.886 1.850 1.833 1.808 1783 3 2.941 1.750 1736 2.884 2.829 2.775 2.723 2.673 2.624 2.577 4 3.902 2531 2487 3.808 3.717 3.630 3.546 3.465 3.387 3.312 3.240 3.170 5 4.853 4.713 4.580 4.452 4.329 4.212 4.100 3.993 3.890 3.791 6 5.795 5.601 5.417 5.242 5.076 4.917 4.767 4.623 4.486 4.355 7 6.728 6.472 6.230 6.002 5.786 5.582 5.389 5.206 5033 4.868 8 7.652 7.325 7.020 6.733 6.463 6,210 5.971 5.747 5.535 5.335 9 8.566 8.162 7.786 7.435 7.108 6.802 6.515 6.247 5.995 5.759 10 9.471 8.983 8.530 8.111 7.722 7.360 7.024 6.710 6.418 6.145 71 10.368 9.787 9.253 8.760 8.306 7.887 7.499 7.139 6.805 6.495 12 11.255 10.575 9.954 9.385 8.863 8.384 7.943 7.536 7,161 6.814 13 12.134 11.348 10.635 9.986 9.394 8.853 8.358 7.904 7.487 7.103 14 13.004 12.106 11.296 10.563 9.899 9.295 8.745 8.244 7.786 7,367 15 13.865 12.849 11.938 11.118 10.380 9.712 9.108 8.559 8.061 7.606 16 14.718 13.578 12.561 11.652 10.838 10.106 9.447 8.851 8.313 7.824 17 15.562 14.292 13.166 12.166 11.274 10.477 9.763 9.122 8.544 8.022 18 16.398 14.992 13.754 12.659 11.690 10.828 10.059 9.372 8.756 8.201 19 17.226 15.678 14.324 13.134 12.085 11.158 10.336 9.604 8.950 8.365 Appendix 2: Present value interest factor of $1 per period at i% for n periods, PVIF(i,n). Period 1% 2% 3% 1 0.9901 0.9804 0.9709 4% 0.9615 2 3 0.9803 0.9612 0.9706 0.9423 6% 0.9524 0.9434 0.9246 0.9070 0.8900 5% 4 0.9610 0.9238 5 0.9515 0.9057 6 0.9420 0.8880 0.8626 0.8375 7 0.9327 0.8706 0.8131 8 0.9235 0.8535 0.7894 9 0.9143 0.8368 0.7664 10 0.9053 0.8203 0.7441 8% 0.9346 0.9259 0.9426 0.8734 0.8573 0.9151 0.8890 0.8638 0.8396 0.8163 0.7938 0.8885 0.8548 0.8227 0.7921 0.7629 0.7350 0.8219 0.7903 0.7599 0.7307 0.7026 0.6756 7% 9% 0.9174 0.9091 10% 0.8417 0.8264 11 0.8963 0.8043 0.7224 0.6496 12 0.8874 0.7885 0.7014 0.6246 0.5568 0.4970 0.7722 0.7513 0.7084 0.6830 0.7835 0.7473 0.7130 0.6806 0.6499 0.6209 0.7462 0.7050 0.6663 0.6302 0.5963 0.5645 0.7107 0.6651 0.6227 0.5835 0.5470 0.5132 0.6768 0.6274 0.5820 0.5403 0.6446 0.6139 0.5584 0.5083 0.4632 0.4224 0.3855 0.5847 0.5268 0.4289 0.4751 0.3875 0.3505 0.3971 0.4440 0.5019 0.4665 0.5919 0.5439 0.5002 0.4604 0.4241 0.3555 0.3186 13 0.8787 0.7730 0.6810 0.6006 0.5303 0.4688 0.4150 0.3677 14 0.8700 0.7579 0.6611 0.5775 0.5051 0.4423 0.3878 0.3262 0.2897 0.3405 0.2992 0.2633 16 16 15 0.8613 0.7430 0.6419 0.5553 0.4810 0.4173 0.3624 0.3152 0.2745 0.239 0.7284 0.8528 0.6232 0.5339 0.4581 0.3936 0.3387 0.2919 0.2519 0.21 02714 03166 02311 02703 0.10