Mini-Tech Shop entered into a lease contract with Nashua Ltd on 1 October 2020 which is also the date on which the lease commenced. Nashua Ltd incurred N$ 25 000 initial direct cost relating to the lease. The lease is for a specialized machine that Mini-Tech Shop will lease from Gomez to use in their printing shop. A fixed amount of N$ 300 000 is payable yearly in arrears on 30 September every year for the duration of a six-year lease term. Each payment of N$ 300 000 includes N$ 30 000 for the maintenance of the machine, borne by the lessor. The useful life of the machine is 7 years. Mini-Tech Shop guaranteed a residual value at the end of the lease amounting to N$ 200 000 and the unguaranteed residual value amount to N$ 120 000. Ownership of the machine does not transfer to Mini-Tech Shop at the end of the lease term. At inception date, the fair value of the machine amounted to N$ 1 250 000. The cost incurred and paid by Mini-Tech Shop to obtain the lease contract amounted to N$ 5 000. Additional Installation cost of N$ 15 000 was paid to Windhoek Engineers Ltd on 1 October 2020, to install the machine and make sure that it functions safely and effectively. Additional Information The year-end of Mini-Tech Ltd is 30 September. Ignore taxation. REQUIRED: Marks (a) Discuss with reference to IFRS 16, how Nashua Ltd should classify the lease. 10 (b) Prepare the journal entries for the year ended 30 September 2021 in relation to the above lease agreement.