Rose Ltd enters into a lease of office equipment for five years. The total value of the equipment

when new is $5000. The lease payments are payable on 30 June each year. The first lease

payment of $1 500 is payable at commencement of the lease on 30 June 2019. The remaining

lease payments are $1 400 in years 2 and 3 and $1 500 in years 4 and 5. In addition to the

payments, the lessor provides a lease incentive with a value of $600 at the commencement of

the lease. The benefits to the lessee under the lease are expected to arise on a straight-line

basis over the term of the lease.

(a) How should Rose Ltd account for this lease transaction?

(b) Prepare the general journal entries in the books of Rose Ltd