**Working:**

To calculate the initial lease liability, we find the present value of an ordinary annuity of $25,000 per year for 5 years at a discount rate of 7%.

PV = Payment × [1 - (1 + r)^-n] / r
PV = $25,000 × [1 - (1 + 0.07)^-5] / 0.07
PV = $25,000 × [1 - 0.712986] / 0.07
PV = $25,000 × 4.100197
PV = $102,504.936

**(a) Initial lease liability:**
$102,504.94

**(b) Initial right-of-use asset:**
Since there are no initial direct costs, prepaid lease payments, lease incentives, or restoration costs, the right-of-use asset equals the initial lease liability.
$102,504.94

**Accounting Standard:**
AASB 16 *Leases*