5. Pennington Ltd enters into lease agreement for an initial two-year period plus an option for an additional three years. The agreement was executed on January 1, 2019. At the outset of the lease agreement it was deemed reasonable certain that the entity may exercise the additional three year option. The lessee is expected to pay year end rentals of $5.4 million, plus maintenance of $1.1 million annually. The maintenance is expected to be paid in arrears on January 1st of each year, and the first payment is expected on January 1, 2020. The entity depreciated all assets using a straight line basis to a nil residual value. The rate implied in the lease is currently 14% and the lease is expected to receive a lease incentive in the form of a cash rebate on the day the entity entered into the agreement. The lease incentive is expected to amount to $250,000. The lessee also incurred legal fees of $1.5 million to draft the lease agreement, which also included legal advice to initiate the lease. Required: a. Prepare the relevant journal entries in the first year of the lease. b. Prepare the relevant financial statement extracts in the first year of the lease