QUESTION TWO [25] Lindor Limited enters into a contract with Property Net Limited for the lease of three floors of an office building. The exact floors are specified in the contract and Property Net Limited is not permitted to relocate tenants to other floors of the building. The commencement date of the lease is 2nd January 2022 and the duration of the lease is for five years with the option to extend for a further five years. Lindor Limited is reasonably certain to exercise the option to extend the lease. 1

The lease payments are R50 000 per annum during the initial term and R55 000 per annum during the optional term, all payable in advance. Lindor Limited incurred initial direct costs of R20 000, comprising R15 000 as compensation to the tenant formerly occupying the three floors and R5 000 as agents commission. These are paid on 2 January 2022. Property Net Limited agrees to reimbur the R5 000 agents commission. The interest rate implicit in the lease is not readably determinable. Lindor Limited 's incremental borrowing rate is 5% per annum. The following present value table is provided: Required: 1. Calculate the amount to record as the initial lease liability AND right of use asset (7) 2. Prepare the journal entries in the accounting records of Lindor Limited for the year ended 31 December 2022