PART B Carspares Limited, a manufacturer of automotive components for both local and forget car Manufacturers, is listed on the Johannesburg Stock Exchange On 1 January 2014, Carspares Limited entered in a lease agreement with Jones Limited the lessor, for the use of a large storage facility at Best Industrial Park outside Johannesburg. The lease was for a period of six years with an option to extend the lease for a further four years. At the commencement of the lease, Carspares Limited was not reasonably certain that it would exercise the renewal option to extend the lease beyond the initial six-year term of the lease On 1 January 2014, Carspares Limited paid initial direct costs of R25 000 relating to the lease and a further amount of R60 000 for leasehold improvements to the storage facility. In terms of the lease agreement, the annual lease payments were as follow: - R320 000 at the commencement of the lease on 1 January 2014; - R150 000 payable annually thereafter during the next five years of the initial six-year term of the lease, and - R180 000 payable annually thereafter in advance during the renewal period commencing on 1 January 2020 The interest rate implicit in the lease was not determinate Carspares Limiteds incremental borrowing at the commencement of the lease was 11% per annum, which reflected the equivalent rak on future borrowings by Carspares Limited Towards the end of the 2017 financial year, Carspares Limiteds rapidly expanding business prompted the company to reconsideres storage capacity in the ama. To this end, the directors of Carspares Limited made a formal decision on 1 January 2018 to exercise the option to extend the original lease for the renewal period of four years to a total se term of 10 years. On 1 January 2018, Campares Limiteds incremental borrowing rate was 10% per annum REQUIRED 1. Briefly discuss how Carspares Limed should account for the decision of its directors regarding the storage facility on 1 January 2018, in accordance with international Financial Reporting standards 2. Prepare journal entries to reflect all matters relating to the lease in the accounting records of Carspares Limited for the year ended 31 December 2018 Entries relating to depreciation and taxation are NOT required