Bluey Ltd is a diversified company with nationwide interests inreal estate finance mining and metal fabrication. The company hasoffices and locations in major cities throughout Australia.Corporate headquarters for Bluey Ltd are located in Perth andexecutives connected with various phases of company operationstravel extensively. Corporate management is currently evaluatingthe feasibility of acquiring a business aircraft that can be usedby company executives to expedite business travel to areas notadequately served by commercial airlines. Proposals for eitherleasing or purchasing a suitable aircraft have been analysed andthe leasing proposal was considered to be more desirable.The proposed lease agreement involves an aircraft that hasa fair value of $1000000. This plane would be leased for a periodof 10 years starting on 1 July 2010. The lease agreement agreementis cancellable only on accidental destruction of the plane. Anannual lease payment of $141 780 is due on 1 July of each yearstarting on 1 July 2010. Maintenance operations are scheduled bythe lessor and Bluey Ltd will pay for these services. Estimatedannual maintenance costs are $6900. The lessor will pay allinsurance premiums and terminal fees which amount to a combinedtotal of $4000 annually and are included in the annual leasepayment of $141780.On expiration of the 10 year lease Bluey Ltd can purchase theaircraft for $44440. The estimated useful life of the aircraft is15 years and its salvage value in the second hand market isestimated to be $100000 after 10 years. The salvage value probablywill never be less than $75000 if the engines are overhauled andmaintained as prescribed by the manufacturer. If the purchaseoption is not exercised possession of the plane will revert to thelessor and there is no provision for renewing the lease agreementbeyond its termination date.Bluey Ltd can borrow $1000000 under a 10 year term loanagreement at an annual interest rate of 12%. The implicit interestrate in the lease is 8% based on ten net rental payments of $137780per year and the initial market value of $1000000 for the plane. On1 July 2010 the present value of all net rental payments and thepurchase option of $44 440 is $888890 using the 12% interest rate.The present value of all net rental payments and the $44440purchase option on 1 July 2010 is $1022226 using the 8% interestrate implicit in the lease agreement is a finance lease as definedin IAS 17.Requireda) What is the appropriateamount that Bluey Ltd should recognize for the leased aircraft onits statement of financial position as on 1st July 2010.State the reasons for your conclusion.b) Assume that the annual leasepayment is $141780 as stated in the question that the appropriatecapitalized amount for the leased aircraft is $1 000 000 on 1 July2010 and that the implicit interest rate is 9%. Provide all thejournal entries (narrations not required) that pertain to the leasefor the year running from 1 July 2010 to 30 June 2011 and thejournal entry to be made on 1 July 2011.