Question 1 (35 marks) Awesome Limited, which has an accounting year end on 31 December, had entered into two lease agreements with the following entities: Warehouse Awesome signs a 8-year, non-cancelable lease agreement to lease a warehouse from Best Logistics. The following information are extracted from the agreement: 1. The agreement requires equal rental payments of $25,000 at the beginning of each year, starting from 31 December 2019. 2. The fair value of the warehouse on 31 December 2019, is $180,000 3. The warehouse has an estimated useful life of 20 years, a guaranteed residual value of $12,000, and an expected residual value of $7,000. Awesome depreciates similar assets using the straight-line method. 4. In addition to the annual rental payment, Awesome is required to pay an annual insurance fee of $ 2,000 to lessor directly. The annual insurance fee is paid on every 31 December, starting from 31 December 2019. 5. The lease is non-renewable and the asset has to be reverted back to the lessor at the termination of the lease. Machine Awesome leased a machine to Sample Limited on 1* July 2019. The lease provisions required Sample to pay three annual payments of $22,000 to Awesome, beginning ist July 2019. The expected remaining economic life of the machine was ten years. Ownership does not transfer at the end of the lease term, there will be no bargain purchase option, and the asset is not a specialized nature. Sample has to return the machine to Awesome. At the inception of the lease, the fair value of the machine was $104,845. Awesome purchased the machine at the cost of $150,000 in 2017. At the end of the lease term, Awesome expect there will be an unguaranteed residual value of $4,000. The interest rate implicit in both leases are 5% per annum. All the companies are adopting straight-line method for depreciation. (b) For the machine, (i) how would Awesome classify the lease? prepare the journal entries for Awesome in the year 2019