Question $7(12$ marks$)$

On January $1,2020,$ Hedf Company signed a $5-$year lease for equipment. The lessor set the annual lease

payment of $$12,500$ to ensure a $6\%$ rate of return. The lease payment is payable at the beginning of each

lease year $($January $1).$ At the end of the lease, possession of the equipment will revert to the lessor. The

equipment has an expected economic life of $6$ years.

Hedfs year end is Dec. $31.$ Hedf uses straight$-$line amortization for capital assets and reports using IFRS.

Required

a$.$ Prepare all journal entries relating to the lease and leased asset for Hedf's year ending Dec. $31,2020.$

b$.$ State the liability amounts that would be reported on the Dec. $31,2020$ balance sheet, indicating the

balance sheet classifications, account names, and amounts.

Please only answer if you know the correct answer.