**(a) Initial lease liability: $102,504.94**  
**(b) Initial right-of-use (ROU) asset: $102,504.94**  

**Governing standard: AASB 16**

### Working
Lease payments form an ordinary annuity of 5 payments of $25,000.  
Discount rate = 7 %.  

\[
\begin{align*}
\text{PV annuity factor} &= \frac{1-(1.07)^{-5}}{0.07}\\
&= \frac{1-0.712986179}{0.07}\\
&= 4.100197443
\end{align*}
\]

\[
\begin{align*}
\text{Initial lease liability} &= 25{,}000 \times 4.100197443\\
&= 102{,}504.936\\
&\approx \$102{,}504.94 \quad\text{(nearest cent)}
\end{align*}
\]

Under AASB 16 there are no initial direct costs, lease incentives, prepaid payments or restoration costs, therefore  

\[
\text{ROU asset} = \text{initial lease liability} = \$102{,}504.94.
\]