b X, X A Avl Av >TT V N Question 1: Mansion Ltd manufactures specialised molding machinery for both sale and lease. On 1 July 2015 Mansion Ltd leased a machine to On The Hill Ltd. The machine being leased cost Mansion Ltd $195 000 to make and its fair value at 1 July 2015 is considered to be $212 515. The terms of the lease are as follows: The lease term is for 5 years, starting on Annual lease payment, payable on 30 June each year Estimated useful life of machine (scrap value $2500) Estimated residual value of machine at end of lease term Residual value guaranteed by On The Hill Ltd Interest rate implicit in the lease The annual lease payment includes an amount of $7500 to cover annual maintenance and insurance costs. On The Hill Ltd may cancel the lease only with the consent of Mansion Ltd On The Hill Ltd intends to lease a new machine at the end of the lease term 1 July 2015 S57 500 8 years $37000 $25 000 10% Required Classify the lease for both Mansion Ltd and On The Hill Ltd. Justify your