Large Mart Ltd is currently involved in designing and developing a fifth-generation rear-facing bike camera. However, it has recently discovered that Cycliq Springs Ltd hold a patent for such a product and is about to commence manufacturing. As a result, Large Mart Ltd has given up on its development attempts and decided to sell the Cycliq Springs Ltd product called “Fly9”.

In order to sell Fly9, Large Mart Ltd has rented a second store in Armidale. On 1^st May 202x Large Mart signs a 6 month rental contract. The rent for the store will be $3,500 per month, and the rental contract requires Large Mart Ltd to prepay all the rent for the 6 month duration on 1^st May 202x.

Once the rental contract for the second store is signed, Large Mart Ltd employs a product specialist (Jeremy Seward) to manage the store in Armidale. Jeremy is currently studying a Bachelor of Accounting at the University of New England and is only available for work on Mondays, Thursdays, and Fridays. Jeremy begins his new role on Monday June 5^th 202x. He has agreed to work 8 hours per day at an hourly rate of $38.00 and the stipulated days. The payroll is processed monthly, and all employees are paid on the 4^th of each month.

On 5^th of June 202x Large Mart Ltd orders 150 Fly9s on credit from Cycliq Springs Ltd for a price of $50 per Fly9. The Fly9s arrive on 6^th of June 202x accompanied by an invoice dated on the same day. The invoice is paid via EFT on 22^nd June. After this initial purchase, the following purchases and sales transactions take place within the second store in Armidale:

• On 7th June 202x, BikesRUs purchases 80 Fly9s on credit from Large Mart Ltd for $210 per Fly9. Three days later BikesRUs notices that they do not have sufficient inventory space for all 80 Fly9s and asks Large Mart Ltd if they couldreturn 20 Fly9s that were purchased on 7th June 202x. Large Mart Ltd accepts the returns and issues a credit note for the 20 excess Fly9s. Large Mart Ltd returns the 20 Fly9s to inventory. On 12th June 202x BikesRUs pays the remaining Fly9s after deducting an early payment discount of 5% from their invoice.
• On 10^th June 202x, Large Mart purchases another 50 Fly9s on credit from Cyclig Springs Ltd for a price of $41.60 each. The Fly9s arrive on the same day, and Large Mart pays this new delivery four days later.
• On 25^th June 202x, Large Mart Ltd holds an end of financial year sale and on the 26^th June 202x Large Mart Ltd sells 70 Fly9s to CamerasRUs on credit for a price of $210. In view of the business relationship between Large Mart Ltd and CamerasRUs a volume discount of $10 per Fly9 applies to the sale reducing the price of each Fly9 to $200. CamerasRUs pays their invoice two days later via EFT.

At the end of June 202x Large Mart Ltd is advised that Cyclig Springs Ltd will begin to manufacture and sell a new version of the Fly9s early July 202x. As a result, Large Mart believes that all Fly9s products currently in store can only be sold if the sale price is significantly reduced to $35 each.

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 don’t 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%.

It is expected that the industrial incinerator has a residual value of $500 at the end of its useful life. At the end of the lease period (year 8), Large Mart Ltd will be able to purchase the equipment for a payment of $400. It is expected that the industrial incinerator has a fair value of $900 at the time Large Mart is able to exercise the purchase option. Large Mart Ltd uses the straight line method to depreciate similar equipment.

Provide all journal entries that are necessary in the books of Large Mart Ltd to account for the signing of the rental contract (if any), the payment of rent for the duration of the contract, and the incurrence of rent for the month of May and June AND provide a detailed explanation of your journal entries.

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