Delta is an entity which prepares financial statements to 31 March each year. The functional currency of Delta is the $. During the year ended 31 March 2013 the following events occurred:

(c) On 1 April 2012, the directors of Delta formed a new company, Epsilon. The directors of Delta own all the voting shares in Epsilon. In exercising their votes, the directors of Delta have agreed to act in Delta’s best interests. Epsilon leased an asset from a financial institution and correctly classified this lease as a finance lease. Epsilon immediately leased the asset to Delta on a one year lease. The rentals payable by Delta to Epsilon were set at the same amount as the rentals payable by Epsilon to the financial institution. The terms of the lease from Epsilon to Delta gave Delta the option to extend the lease under exactly the same terms. This extension option will continue to be available on an annual basis until the lease between Epsilon and the financial institution expires. The asset is a vital one in Delta’s production process. Epsilon does not undertake any other transactions. (6 marks)

Required: 
Explain and show (where possible by quantifying amounts) how the three events would be reported in the financial statements of Delta for the year ended 31 March 2013.

Note: The mark allocation is shown against each of the three events above.