Question 15) Rami entered into a finance lease on 1 July 2012. The terms of the lease were six payments of $200 payable annually in arrears. The cash price of the asset (present value of lease payments) was $870.

The interest rate implicit in the lease is 10%.

Required:

Show the interest allocation for the first four payments. (9 marks)

Record the journal entries for the initial lease contract and first year interest in lessee books. (5 marks)