Medusa Plc Enters into a Non-Cancellable 10-Year Lease with Lennox

Medusa Plc enters into a non-cancellable 10-year lease with Lennox Plc on 1 July 2013.The lease is for an item of equipment that at the inception of the lease has a fair value of £322 572 (the amount that Medusa paid for the asset on 1 July 2013) .The equipment is expected to have a useful life of 12 years and the lease term is for 10 years.The lease contract includes a bargain purchase option of £4000 that Lennox Plc will be able to exercise at the end of the 10-year lease.The lease payments will be made on 30 June each year,beginning 30 June 2014.The payments are to be £55 000 each year with £5000 of this being for executory costs to cover maintenance of the equipment.The maintenance will be carried out annually.The interest rate implicit in the lease is 9%.What are the entries in the books of Medusa Plc for 1 July 2013 and 30 June 2014 (round amounts to the nearest pound) ?

A) 01 July 2013
$\begin{array}{|l|l|l|l|}\hline \mathrm{Dr} & \text { Lease receivable } & 322572 & \\\hline \mathrm{Cr} & \text { Cash } & & 322572 \\\hline\end{array}$

$30 \text { June } 2014$
$\begin{array}{|c|l|r|r|}\hline \mathrm{Dr} & \text { Cash } & 50000 & \\\hline \mathrm{Cr} & \text { Interest revenue } & & 29032 \\\hline \mathrm{Cr} & \text { Lease receivable } & & 20968 \\\hline \mathrm{Dr} & \text { Lease receivable } & 5000 & \\\hline \mathrm{Cr} & \text { Executory expense recoupment } & & 5000 \\\hline\end{array}$
B) 01 July 2013
$\begin{array}{|r|l|r|r|}\hline \mathrm{Dr} & \text { Equipment } & 322572 & \\\hline \mathrm{Cr} & \text { Cash } & & 322572 \\\hline & & & \\\hline \mathrm{Dr} & \text { Lease receivable } & 320883 & \\\hline \mathrm{Dr} & \text { Loss on lease agreement } & 1689 & \\\hline \mathrm{Cr} & \text { Equipment } & & 322572 \\\hline\end{array}$

$30 \text { June } 2014$
$\begin{array}{|l|l|l|l|}\hline \mathrm{Dr} & \text { Cash } & 55000 & \\\hline \mathrm{Cr} & \text { Interest revenue } & & 28879 \\\hline \mathrm{Cr} & \text { Lease receivable } & & 26121 \\\hline\end{array}$
C) 01 July 2013
$\begin{array}{|l|l|r|r|}\hline \mathrm{Dr} & \text { Equipment } & 322572 & \\\hline \mathrm{Cr} & \text { Cash } & & 322572 \\\hline & & & \\\hline \mathrm{Dr} & \text { Lease receivable } & 272572 & \\\hline \mathrm{Dr} & \text { Deferred executory costs } & 50000 & \\\hline \mathrm{Cr} & \text { Equipment } & & 322572\\\hline\end{array}$

$30 \text { June } 2014$
$\begin{array}{|l|l|r|r|}\hline \mathrm{Dr} & \text { Cash } & 50000 & \\\hline \mathrm{Cr} & \text { Interest revenue } & & 24531 \\\hline \mathrm{Cr} & \text { Lease receivable } & & 25469 \\\hline & & & \\\hline \mathrm{Dr} & \text { Cash } & 5000 & \\\hline \mathrm{Cr} & \text { Deferred executory costs } & & 5000 \\\hline\end{array}$
D) 01 July 2013
$\begin{array}{|c|l|l|l|}\hline \mathrm{Dr} & \text { Equipment } & 322572 & \\\hline \mathrm{Cr} & \text { Cash } & & 322572 \\\hline & & & \\\hline \mathrm{Dr} & \text { Lease receivable } & 322572 & \\\hline \mathrm{Cr} & \text { Equipment } & & 322572 \\\hline\end{array}$


$30 \text { June } 2014$
$\begin{array}{|c|l|l|l|}\hline \mathrm{Dr} & \text { Equipment } & 322572 & \\\hline \mathrm{Cr} & \text { Cash } & & 322572 \\\hline & & & \\\hline \mathrm{Dr} & \text { Lease receivable } & 322572 & \\\hline \mathrm{Cr} & \text { Equipment } & & 322572 \\\hline\end{array}$