Paragraph Style QUESTION 1 (20 Marks: 36 Minutes) IGNORE VAT Sheldon Limited entered into a non-cancellable lease agreement on 1 September 2019 with Sino (Pty) Limited, "Sino". The agreement was for Sino to lease 20 large storage containers that will be used as storage sheds, specifically designed for Sino. The size of the containers are 12m long x 2.5m wide and 3m high. The following terms and conditions were part of the agreement Lease term 6 years Instalments payable annually in advance R19 800 Unguaranteed residual value (Scrap value) R1 980 Contract fees to draw up the lease agreement (Paid by Sheldon Limited) R1 500 . Additional information: The fair value of the 20 storage containers at inception of the lease amounts to R93 500 The storage containers have an estimated useful life of 6 years. The lease agreement makes no provision for Sino to purchase the storage containers or to extend the lease term. The implicit interest rate is 10.498% . REQUIRED: 1) Discuss, in terms of IFRS 16, LEASES, how this lease should be classified in the accounting records of Sheldon Limited for the year 31 August 2020 (10 Marks) 2) Prepare the journal entries for the year ended 31 August 2020 in the accounting records of Sheldon Limited using the Gross method of recording. Closing entries, narrations and dates are not required. Show all workings. Rounding to the closest Rand. (7 Marks)