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(a) assess whether the transfer of the machinery is a sale or not a sale. (b) prepare the relevant journal entries for the year ended 31 December 2021.

(a) assess whether the transfer of the machinery is a sale or not a sale. (b) prepare the relevant journal entries for the year ended 31 December 2021.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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5. On 1 April 2021, due to an urgent financial need, Dusk Bhd a neighboring company sold one of its machinery to Dawn Bhd at its fair value of RM80,000. Dusk Bhd immediately leased back the machinery at a monthly rental of RM1,800, payable for 4 years. The first rental is paid on 30 April 2021. The interest will be allocated over the lease term using straight line method. Dusk Bhd purchased the machine a year ago at a cost RM106,000. The carrying amount of the machine as at 1 April 2021 is RM79,500. The machinery has an estimated useful life of 5 years. Based on (5), (a) assess whether the transfer of the machinery is a sale or not a sale. (b) prepare the relevant journal entries for the year ended 31 December 2021.
Transcribed Image Text:5. On 1 April 2021, due to an urgent financial need, Dusk Bhd a neighboring company sold one of its machinery to Dawn Bhd at its fair value of RM80,000. Dusk Bhd immediately leased back the machinery at a monthly rental of RM1,800, payable for 4 years. The first rental is paid on 30 April 2021. The interest will be allocated over the lease term using straight line method. Dusk Bhd purchased the machine a year ago at a cost RM106,000. The carrying amount of the machine as at 1 April 2021 is RM79,500. The machinery has an estimated useful life of 5 years. Based on (5), (a) assess whether the transfer of the machinery is a sale or not a sale. (b) prepare the relevant journal entries for the year ended 31 December 2021.
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