Question: Winston Industries and Ewing SA enter into an agreement that requires Ewing to lease three diesel-electric engines to Winston. Winston has agreed to lease them for a period of 10 years. The lease is non-cancelable, becomes effective on January 1, 2023, and requires equal annual rental payments to be made on each January 1, starting January 1, 2023. The implicit interest rate used by Ewing is 6% and unknown to Winston. Winston's incremental borrowing rate is 8%. The total cost of building the three engines is 2,600,000. The fair value and the economic life of the engines at the commencement of the lease are estimated to be 3,000,000 and 10 years, respectively, with residual value set at zero. Winston depreciates similar equipment on a straight-line basis. At the end of the lease, Winston assumes title to the engines. Collectibility of the lease payments is probable. Required: (Round all amounts to the nearest pound.) (a) Compute the amount of the annual lease payment that is required by the lessor and discuss the nature of this lease transaction to the lessor. (b) Compute the initial value of the lease liability to the lessee. (c) Prepare the journal entries Winston would make in 2023 and 2024 related to the lease arrangement. (Prepare a lease amortization schedule for the first 2 years.) (d) Prepare the journal entries Ewing would make in 2023 and 2024 related to the lease arrangement. (Prepare a lease amortization schedule for the first 2 years.) (e) Assume that Winston incurs legal fees related to the execution of the lease of 30,000. In addition, assume Winston receives a lease incentive from Ewing of 20,000 to enter the lease. Compute the value of the lease liability and the value of the Right-of-Use asset to the lessee at the commencement of the lease.