Question 3 On 30 June 2022, Happy Ltd purchased machinery for its fair value of $41 600 and then leased it to Laugh Ltd. Laugh Ltd incurred $220, and Happy Ltd incurred $797, in costs to negotiate the lease agreement. The machine is expected to have an economic life of 5 years, after which time it will have a residual value of $2500. The lease agreement details are as follows. Length of lease Commencement date Annual lease payment, payable 30 June each year commencing 30 June 2022 Residual value at the end of the lease term Residual value guarantee by lessee Interest rate implicit in the lease 4 years 30 June 2022 $12 000 $10 000 $8.000 9% All insurance and maintenance costs are paid by Happy Ltd and amount to $2 000 per year and will be reimbursed by Laugh Ltd by being included in the annual lease payment of $12 000. The lease has been classified as a finance lease by Happy Ltd. The machinery will be depreciated on a straight-line basis. It is expected that Laugh Ltd will return the machinery at the end of the lease to Happy Ltd. Required: 1. Prepare the journal entries to account for the inception of the lease on 30 June 2022, in the books of Laugh Ltd. 2. Prepare the journal entries to account for the lease in the books of Laugh Ltd for the year ended and 30 June 2023. 3. Prepare the journal entries to account for the inception of the lease on 30 June 2022, in the books of Happy Ltd. 4. Prepare the journal entries to account for the lease in the books of Happy Ltd for the year ended and 30 June 2023.