PART C: Leases Platino Bhd leases the following assets from three lessors. The assets are to be used in the property development of the company. The details of the assets are as follows: Bhd Lessor Type of asset Yearly rental Inception date Lease term Colton Excavator RM15,000 (first payment on 31 December 2020) 1 January 2020 10 years Marisha Bhd Truck RM12,000 (first payment on 28 February 2021) 1 March 2020 7 years Tinker Bhd Crane RM10,000 (first payment on 30 June 2020) 1 July 2019 5 years

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Specific for question 13b and c. Thank you.

PART C: Leases
Platino Bhd leases the following assets from three lessors. The assets are to be used in the property
development of the company. The details of the assets are as follows:
Lessor
Colton Bhd
Marisha Bhd
Tinker Bhd
Туре ог аsset
Excavator
Truck
Crane
Yearly rental
RM15,000 (first
payment on 31
December 2020)
RM12,000 (first
payment on 28
February 2021)
RM10,000 (first
payment on 30 June
2020)
1 January 2020
I March 2020
1 July 2019
5 years
Inception date
Lease term
10 years
7 years
Estimated economic 20 years
9 years
10 years
life
Purchase option
RM75,000 at end of None
None
year 10.
Renewal option
None
None
None
Fair value at the
RM220,000
RM150,000
RM55,000
inception of lease
Guaranteed
-0-
RM15,000
RM10,000
residual value
Estimated residual
RM90,000
RM11,000
RM10,000
value at end of lease
term
Implicit rate
5%
4%
Transcribed Image Text:PART C: Leases Platino Bhd leases the following assets from three lessors. The assets are to be used in the property development of the company. The details of the assets are as follows: Lessor Colton Bhd Marisha Bhd Tinker Bhd Туре ог аsset Excavator Truck Crane Yearly rental RM15,000 (first payment on 31 December 2020) RM12,000 (first payment on 28 February 2021) RM10,000 (first payment on 30 June 2020) 1 January 2020 I March 2020 1 July 2019 5 years Inception date Lease term 10 years 7 years Estimated economic 20 years 9 years 10 years life Purchase option RM75,000 at end of None None year 10. Renewal option None None None Fair value at the RM220,000 RM150,000 RM55,000 inception of lease Guaranteed -0- RM15,000 RM10,000 residual value Estimated residual RM90,000 RM11,000 RM10,000 value at end of lease term Implicit rate 5% 4%
(13) Mr. Faizal, who just graduated in accounting, is auditing the company's financial
statements for the year ended 31 December 2020. He noticed that on 1 January 2020, the
company entered into a leasing contract with Cloud Bhd to lease a photocopy machine. The
terms of the contract are as follows:
i. The non-cancellable lease term of 5 years.
ii. Lease rental of RM3,500 per year (paid on every 31 December) and commencing on
31 Dec 2020.
iii. Platino Bhd guarantees the residual value of RM2,500.
iv. The estimated economic life of the asset is 5 years.
v. The implicit rate and Platino Bhd's incremental borrowing rate is 6% per year.
In the company's accounting record, only the following joumal entries for the photocopy
machine are prepared for FYE 2020:
Dr. Leased asset
16,611
Cr. Lease liability
16,611
Mr. Faizal asked Miss Mia, an account clerk, the reasons the company prepared such
journal entries. Miss Mia explained that the transaction should be recognized as a finance
lease based on MFRS117 Leases.
Required (Round the answer to the whole RM):
(a) Discuss whether the leasing transaction for the photocopy machine is appropriately
recorded by Platino Bhd. (CTPS 1)
(b) Explain whether there is any implication to Platino Bhd when the company records the
leasing transaction in accordance with MFRS 117. (CTPS 2)
(c) Discuss how Platino Bhd should account for the leasing transaction for the year 2020.
Show the relevant calculations and journal entries, where appropriate. (CTPS 3,4)
Transcribed Image Text:(13) Mr. Faizal, who just graduated in accounting, is auditing the company's financial statements for the year ended 31 December 2020. He noticed that on 1 January 2020, the company entered into a leasing contract with Cloud Bhd to lease a photocopy machine. The terms of the contract are as follows: i. The non-cancellable lease term of 5 years. ii. Lease rental of RM3,500 per year (paid on every 31 December) and commencing on 31 Dec 2020. iii. Platino Bhd guarantees the residual value of RM2,500. iv. The estimated economic life of the asset is 5 years. v. The implicit rate and Platino Bhd's incremental borrowing rate is 6% per year. In the company's accounting record, only the following joumal entries for the photocopy machine are prepared for FYE 2020: Dr. Leased asset 16,611 Cr. Lease liability 16,611 Mr. Faizal asked Miss Mia, an account clerk, the reasons the company prepared such journal entries. Miss Mia explained that the transaction should be recognized as a finance lease based on MFRS117 Leases. Required (Round the answer to the whole RM): (a) Discuss whether the leasing transaction for the photocopy machine is appropriately recorded by Platino Bhd. (CTPS 1) (b) Explain whether there is any implication to Platino Bhd when the company records the leasing transaction in accordance with MFRS 117. (CTPS 2) (c) Discuss how Platino Bhd should account for the leasing transaction for the year 2020. Show the relevant calculations and journal entries, where appropriate. (CTPS 3,4)
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