ABC ltd signed a contract to lease a store from XYZ ltd for a non-cancellable period of three years --> they can renew the lease for a further two years at the same annual payment rate! ABC will make expensive renovations that will then have a usefule eco life of 7 years!

The payment is $40,000 at commencement then 60,000 half yearly after that! the implicit interest rate is 12%

My first question is, for depreciation, should i use the useful life of 7 years or only the 5 years as in the case it isn't explicitly said that there will be a transfer of ownership

my next question is does this case contain a lease?