Large Mart has previously attempted to design and develop an interactive screen called Collaborate The interactive screen will allow teachers to present interactively with sound, touch and animation. However, Large Mart has recently discovered that an Italian company called Milano already holds a patent for this type of device. As a result, Large Mart has given up on its development attempts and decided to sell the Milano product, which is called Interrativo.

In order to sell Interrativo, Large Mart has rented a second store in Albury. The rent contract is for two (2) months with an option to extend the contract by a further ten (10) months. Large Mart signs the contract on 1^st June 201x. The rent for the store will be $2,580 per month and rent payments will be made by electronic funds transfer (EFT) on the last day of the month.

On 1st June 201x when the renting contract for the new store is signed, Large Mart employs a Game Designer Educator (John) and a store assistant (Ben) to work in the store in Albury. John is employed for 7.5 hours per day from Monday to Friday (5 days a week). He begins his jobs on 10th June 201x and will be paid $60 per hour. Ben is employed for 5 hours every day of the week (7 days a week). He starts his job on 14^th June 201x and will be paid $30 per hour. Large Mart's payroll is processed on the 5^th day of each month.

An important part of the new store design is a collaborative hub which staff can use for training and demonstration purposes, before customers can purchase the product. The collaborative hub in the new store is designed in Shenzhen and manufactured in Sydney. Large Mart ordered a collaborative hub, and it was delivered on 2^nd June 201x. On that day, Large Mart also receives an invoice of $15,000 from the Sydney manufacturer as well as an invoice of $23,000 from the designers in Shenzhen. The truck driver who delivered the collaborative hub left an invoice of $1,500 for its delivery. On 3^rd June 201x Large Mart incurred $2,300 for commissioning the collaborative hub. That is the process of assuring that all systems and components of the collaborative hub is designed, installed, tested, operated, and maintained according to the operational requirements of Large Mart. Large Mart pays all invoices by the 9^th of June 201x through EFT. As part of this payment Large Mart claims an early payment discounts of 5% from the invoice of the designers of the collaborative hub.

On 3^rd June 201x when the new store is completed, Large Mart orders 250 interactive screens from Milano for a price of $500 per interactive screen; these interactive screens arrive on 4^th June 201x. The interactive screens are purchased on credit and paid via EFT at the end of the month.

On 6th June 201x, UNE purchases 100 interactive screens for the business department for a price of $1,900 per interactive screen on credit. Two days later UNE notices that they have ordered far too many interactive screens and asks Large Mart to return 20 unused interactive screens. Lage Mart allows UNE to return the 20 excess interactive screens and returns them to inventory of the store. UNE then pays the remaining interactive screens on the 9^th of June 201x after deducting an early payment discount of 10%.

On 10^th June 201x, Large Mart purchases another 200 interactive screens from Milano at a special price of $700 per interactive screen. The interactive screens arrive on the same day, and Large Mart pays this new delivery of interactive screens via EFT three days later.

On 20^th June 201x, Large Mart holds an end of financial year sale. On the 21^th June 201x Large Mart sells 150 interactive screens to La Trobe University (LTU). LTU purchases the interactive screens on credit for a list price $1,600 per interactive screen. However, LTU also received a volume discount of $50 per item at time of purchase (reducing the price of each interactive screen to $1,550).

At the end of the financial year that is 30 June 201x, Large Mart is advised that Milano will begin to sell a new version of the interactive screen called Interrativo2 early in July 20x1. As a result, Large Mart believes that all interactive screens currently in store can only be sold if the sales price is immediately reduced to $600 per interactive screen.

On 1st July 201x Large Mart requires additional equipment for the new store. The purchase price of the equipment is $140,000. However as Large Mart does not have sufficient cash resources it decides to enter into a lease agreement with Wise Ltd. The duration of the lease is 3 years, and the equipment has an expected useful life of 4 years. The lease contract requires Large Mart to pay $52,000 (via EFT) on 30th June of each year during the lease period starting 30 June 201x +1. The annual payment includes $2,000 to reimburse the lessor for costs associated with maintaining the equipment. The lease contract states that Large Mart can cancel the agreement at any time during the lease period, but Large Mart must pay an exit fee equal to 65% of the remaining lease liability if the lease contract is cancelled. The interest rate implicit in the lease is 10%.

At the end of the lease period, Large Mart will be able to purchase the equipment for a payment of $20,000. At that time to fair value of the equipment is $40,000. The equipment is depreciated using the declining balance depreciation method.

IMPORTANT NOTE: Large Mart has decided to use the exemption rules outlined in AASB 16, paragraphs 5-8 for leased items to which these exemptions apply.

Please answer the following questions about the scenario outlined above:

Question 1) Provide all journal entries that are necessary in the books of Large Mart to account for the signing of the renting contract (if any). In addition, provide all journal entries that are necessary in the books of Large Mart to account for the payment of rent and wages (if any). Also, provide a detailed explanation of why you have chosen the accounting treatment that you have used (1 mark).

Question 2) Calculate the cost of the collaborative hub and provide all journal entries that are necessary in the books of Large Mart to account for the receipt and payment of the invoices for design, manufacture, delivery and commissioning of the collaborative hub, and provide an outline and explanation for all necessary calculations (1.5 mark)

Question 3) Provide all journal entries that are necessary in the books of Large Mart to account for all purchase, sales and returns transactions (including the payment and receipt of funds) of the new store, assuming that Large Mart uses a perpetual inventory system on a first-in-first-out basis (4 marks).

Question 4) Calculate Cost-of-Goods-Sold and the closing balance of the Inventory Trade/Sales account for the year ended 30 June 201x of the new Large Mart Store (based on the information provided in this assignment ONLY), determine if the release of the Interrativo2 will have any impact on the closing balance of the Inventory Trade/Sales account, explain your decision, and provide all journal entries that are necessary in the books of Large Mart to account of this impact (if any exists) (3.5 marks).

Question 5) Determine whether the lessor of the equipment will be required to apply the accounting regulations for operating leases or finance leases AND PROVIDE A DETAILED EXPLANATION FOR YOUR DECISION (2 mark).

Question 6) Provide all journal entries that are necessary in the books of Large Mart to record the inception of the lease for the equipment, the lease payments made at the end of the first year of the lease term (30 June 201x+1), and the depreciation of the leased equipment for the month ended 31st July 201x (if any depreciation is required) (3 marks). YOU MUST PROVIDE DETAILS OF ALL NECESSARY CALCULATIONS!