Delta is an entity which prepares financial statements to 30 September each year. The financial statements for the year ended 30 September 2016 are shortly to be authorised for issue. The following events are relevant to these financial statements:

(a) On 1 October 2014, Delta purchased an asset for $20 million. The estimated useful life of the asset was 10 years, with an estimated residual value of zero. Delta immediately leased the asset to Epsilon. The lease term was 10 years and the annual rental, payable in advance by Epsilon, was $2,787,000. Delta incurred direct costs of $200,000 in arranging the lease. The lease contained no early termination clauses and responsibility for repairs and maintenance of the asset rest with Epsilon for the duration of the lease. The directors of Delta correctly computed the annual rate of interest implicit in the lease as 8%. At an annual discount rate of 8% the present value of $1 receivable at the start of years 1–10 is $7·247. (8 marks)

Required:
Explain and show how the three events would be reported in the financial statements of Delta for the year ended 30 September 2016.

Notes:
1. The mark allocation is shown against each of the three events above.
2. In explaining event (b), you do not need to consider the impact on inventory and cost of sales.