On 1^st June 202X Large Mart rents a new store in Armidale and signs a rental contract for nine (9) months with an option to extend the contract by a further three (3) months. The rent of the store will be $1,250 per month and the renting contract requires Large Mart to prepay all the rent for the 9-month duration by electronic funds transfer (EFT) on the 30^th day of June 202X.

On the 20^th of June 202X Large Mart: incurred $500 in labour and $1,000 in travel costs for its managers to inspect possible new photocopiers and for negotiating the purchase of a new photocopier. ordered the new photocopier which was delivered on 21^st June 202X.

On 21^st of June 202X Large Mart received: an invoice for $3,500 for the cost of renovating a section of the warehouse, in anticipation of a new photocopiers arrival. an invoice from Next Office Supplies for $10,500 for the cost of the new photocopier with the following terms 3/14. an invoice for $1,800 for the freight and insurance costs to get the new photocopier to the warehouse. an invoice for $2,800 for the cost of cooling equipment to assist in the efficient operation of the new photocopier. an invoice for $500 for the cost of repairing the warehouse door which was damaged by the installation of the new photocopier.

On 1st of June 202X Large Mart orders 20 notebook computers from Dell for a price of $3000 per notebook computer. The notebook computers arrive on 4th of June 202X, and are paid via electronic funds transfer (EFT) on 14th of June 202X after deducting an early payment discount of 5%.

On 5^th June 202X, UNE purchases 8 notebook computers on credit for $6,000 per notebook computer for the law department. On 7^th June 202X UNE pays the notebook computers via EFT after deducting an early payment discount of 8%.

On 9th June 202X, the UNE law department returns three damaged notebook computers that were purchased on 5th June 202X. Large Mart accepts the return and issues a credit note to UNE for the returned damaged notebook computers. Large Mart destroys the three damaged notebook computers as they are not in a condition that would allow them to be re-sold. Large Mart does not receive any compensation from Dell for the damaged notebook computers.

On 10th June 202X, Large Mart purchases another 20 notebook computers from Dell at a special price of $2,800. Normally these notebook computers would cost $3,000, but Large Mart was able to receive a volume discount of $200 for each notebook computer. The notebook computers arrive on the same day with the following terms 3/30. Large Mart pays this new delivery of notebook computers via EFGT on 9^th July 202X.

On 22^nd June 202X, Large Mart holds an end of financial year sale.

On the 23rd of June 202X Large Mart sells 18 notebook computers to Monash University (MU). MU purchases the notebook computers on credit for a list price $4,600 per notebook computer. However, MU also received a volume discount of $100 per item at time of purchase (reducing the price of each notebook computer to $4,500). At the end of the financial year that is 30 June 202X, Large Mart is advised that Dell will begin to sell a new version of the notebook computer early in July 202X. As a result, Large Mart believes that all notebook computers currently in store can only be sold if the sales price is immediately reduced to $2,400 per notebook computer.

On 1st July 202X, Large Mart required an Automatic Wrapping Machine (AWM), and the purchase price is $467,112. However as Large Mart did not have sufficient cash resources at that time it decided to enter into a lease agreement with Verdex Ltd. The duration of the lease is 3 years, and the AWM has an expected useful life of 5 years. The lease contract requires Large Mart to pay $155,000 (via EFT) on 30th June of each year during the lease period starting 30 June 202X +1. The annual payment includes $5,000 to reimburse the lessor for costs associated with the AWM. The lease contract states that Large Mart can cancel the agreement only with the permission of the lessor. The interest rate implicit in the lease is 7%. It is expected that the AWM has a residual value of $50,000 at the end of its useful life. At the end of the lease period, Large Mart will be able to purchase the AWM for a payment of $60,000. It is expected that the equipment has a fair value of $90,000 at the time Large Mart is able to exercise the purchase option. Large Mart uses the sum of digits method (SOD) method to depreciate similar equipment. 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: I) Determine whether the lessor of the AWW will be required to apply the accounting regulations for operating leases or finance leases AND PROVIDE A DETAILED EXPLANATION FOR YOUR DECISION. (2 marks). Provide the journal entries in the records of the lessor for the year ended 30 June 202X+1 (1 mark). Question: II) Provide all journal entries that are necessary in the books of Large Mart to record the inception of the lease for the AWM, the lease payments made at the end of the first year of the lease term (30 June 202X+1), and the depreciation of the leased AWM for the month ended 31st July 202X (if any depreciation is required) (3 marks). YOU MUST PROVIDE DETAILS OF ALL NECESSARY CALCULATIONS!