On 1st July 202x, Large Mart Ltd leases an industrial incinerator to burn wrapping and wastage generated by their second store and ensure these items dont end up as landfill. The purchase price of the industrial incinerator is $45,000. However as Large Mart Ltd did not have sufficient cash funds at that time it decided to enter into a lease agreement with ICAS Ltd. The duration of the lease is 8 years, and the equipment has an expected useful life of 10 years. The lease contract requires Large Mart Ltd to pay $9,000 (via EFT) on 30th June of each year during the lease period starting 30 June 202x +1. The annual payment includes $1,000 to reimburse the lessor for costs associated with the equipment. The lease contract states that Large Mart Ltd can cancel the agreement at any time during the lease period, but Large Mart Ltd must pay an exit fee equal to 75% of the remaining lease liability if the lease contract is cancelled. The interest rate implicit in the lease is 10%.

Question 5) Determine if ICAS Ltd (lessor) will have to account for the outlined lease agreement of the industrial incinerator as an operating lease or a finance lease, AND provide a detailed explanation for your decision

Question 6) Provide all journal entries that are necessary in the books of Large Mart Ltd (lessee) to record the inception of the lease for the industrial incinerator, 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 equipment for the month ended 31 July 202x (if any depreciation is required). YOU MUST PROVIDE DETAILS OF ALL NECESSARY CALCULATIONS!