Question 24: On 1^st July 2023, Iselin Ltd signs a non-cancellable agreement to lease a building from weber Ltd. The lease agreement requires seven annual payments of $375,000, with the first payments being made on 30^th June 2024. Within each of these payments, $25,000 represents a payment to Weber Ltd for rates and maintenance of the property. The building is expected to have a life of only nine years, after which time it will have no salvage value. At 1^st July 2023 the land and building have fair value of $588,160 and $1,372,370 respectively. The land and building are expected to have a value (unguaranteed by the lessee) of $500,000 at the end of year , with the land and building are expected to be worth $150,000 and the building component expected to be worth $350,000. The rate of interest implicit in the lease is 10%.

Required:

1. Prove that the rate of interest implicit in the lease is 10%
2. Provide the journal entries for the years ending 30^th June 2024 & 30^th June 2025 for Iselin Ltd.
3. Provide the journal entries for the years ending 30^th June 2024 & 30^th June 2025 for Weber Ltd. (LO 11.2, 11.3, 11.4, 11.5, 11.6, 11.7).