Tutorial 9 Jane Lazar and Huang (4th Edition)Chapter 23-MFRS 117
Question 2 page 507 An entity leases a plant from another entity for a period of three years. The fair value of the asset is RM5 million, and the lease rentals are RM900,000, payable half-yearly. The unguaranteed residual value is RM200,000. The first payment is made on delivery of the plant. The approximate implicit interest rate is 9.3% and the present value of the minimum lease payments is RM4.850 million. Required: Show how the lease will be accounted for in the accounts of the lessee.
RM900,000 x 3 years x 2 = RM5.4m
No interest since first payment on delivery
Question 4 page 508 Basel has acquired a plant under a finance lease on the following terms: a) Payme ayment nt of of RM10 RM100, 0,00 000 0 is is to be be made made eve every ry six six mont month h in adva advanc nce. e. b) Fir First paym paymen entt is is to to be be mad made e on on 1 Janu Januar ary y x2. x2. c) The The leas lease e prov provid ides es for for a tota totall of ten ten ins insta tall llme ment nt pay payme ment nts. s. d) Fair air value alue of the the asse assett is is RM8 RM810 10,0 ,000 00.. e) Econo conomi micc lif life e of of the the asse assett is is six six year years. s. f) At the the end end of the the leas lease e peri period od,, titl title e to to the the pla plant nt is to to pass pass to to Base Basel. l. g) Inte Interrest est rat rate e in in the the leas lease e is is 10% 10% per per ann annum um.. h) Less Lessee ee is to incu incurr ini initi tial al dir direc ectt cos costt of of RM1 RM10,0 0,000 00.. Required: Prepare extracts extracts of the statement statement of profit or loss of Basel for the years ended 31 December x2 and x3 and the statement of financial position as at 31 December x2 and x3.
Interest = (borrowing – payment) x 10% x ½
Interest = (borrowing – payment + previous interest same year - payment) x 10% x ½
35,500 + 32,275
28,889 + 25,333
Initial Direct Cost incurred by lessee = became part of the NCA’s cost
810,000 + 10,000
200000 - 28889 200000 - 21600
1/1 1st payment
1/7
2nd payment
31/12 Interest payment
Interest payment
Lease payable should not include interest if payment is in arrears
Question 9 page 510
a. In resp respec ectt of the the lease lease with with Bes Beste test st Bhd, Bhd, i. Draft Draft the entri entries es that that will will appear appear in the stat statem ement ent of profit or loss of Printshop Bhd (lessor) for the year ended 31 December x6. ii. Draft Draft the the ent entrie riess that that will will appe appear ar in the the sta state temen mentt of financial position of Printshop Bhd as at 31 December x6 and x7.
i.
Initial direct cost incurred by lessor = Become expenses
ii.
*lease expense
b. i.
Expl Explai ain n how how they they shou should ld trea treatt the the tran transa sact ctio ion n bet betwe ween en Good Goodes estt Bhd Bhd and Printshop Bhd and why.
ii.
Draft Draft the journa journall entr entries ies to recor record d the the tra transa nsacti ctions ons in the book bookss of Goodes Goodestt Bhd Bhd (lessee) for the year ended 31 December x6.
