Operating leases in the books of the Lessor Mambo Ltd hires out individuals plant on long term operating leases. On 1^st January 2001 it entered into a seven year lease on a mobile crane. The terms of the lease are shs. 1,750,000 payable on 1^st January 2001, followed by six rentals of shs.700, 000, paid on 1 Jan 2001 to 2007. The crane will be returned to Mambo Ltd on 31^st Dec. 2007. The crane cost shs.880, 000 and has a 25 year useful with no residual value.

Required:

1. Calculate the annual rental income that will be claimed by Mambo Ltd. (1 mark)
2. Prepare extracts from the income statement for Mambo Lt from 2001 to 2005. (4 marks)
3. Prepare the balance sheet extract for Mambo Ltd from 2001 to 2005. (10 marks)