On 1 July 2023, Sherlock Ltd leased a processing plant to Holmes Ltd. The plant was purchased by Sherlock Ltd on 1 July 2023 for its fair value of $348942. The lease agreement contained the following provisions.

Lease term 3 years

Economic life of plant 5 years

Annual rental payment, in arrears (commencing 30/6/24) $120000

Residual value at end of the lease term $50000

Residual guaranteed by lessee $30000

Interest rate implicit in lease 8%

The lease is cancellable only with the permission of the lessor. Holmes Ltd intends to return the processing plant to Sherlock Ltd at the end of the lease term. The lease has been classified as a finance lease by Sherlock Ltd.

Required

Prepare: the lease payments schedule for Holmes Ltd (show all workings) the journal entries in the records of Holmes Ltd for the year ended 30 June 2025.

Prepare: the lease receipts schedule for Sherlock Ltd (show all workings) the journal entries in the records of Sherlock Ltd for the year ended 30 June 2025.