Question 1 Luna Leasing Sdn Bhd (LLSB) agrees to provide Pali Sdn Bhd (PSB) with equipment under a non cancelable lease for 6 years. The cost of equipment is RM65,264. It has an expected useful life of 5 years. The lease terms are as follows: i. ii. iii. The equipment will have no residual value when the lease term ends. The lease rental is determined on a 16% rate per annum. PSB agrees to pay all maintenance costs amounted to RM300 per year throughout the lease period. iv. Lease rental of RM15,264 per year is to be paid on 31 December each year for 5 years commencing 31 December 2021 and RM15,310 is to be paid on the last year of leasing agreement. The equipment was delivered on 1 January 2021 to PSB. Both companies adjust and close books on 31 December every year. PSB depreciates the equipment by using straight line method. The title of the equipment is to be passed to PSB at the end of the lease period. Required: a) Discuss the factors that would influence the management's decision to lease rather than purchase an asset. ' b) Prepare the related journal entries for the year 2021 in the book of LLSB and PSB -1
Question 1 Luna Leasing Sdn Bhd (LLSB) agrees to provide Pali Sdn Bhd (PSB) with equipment under a non cancelable lease for 6 years. The cost of equipment is RM65,264. It has an expected useful life of 5 years. The lease terms are as follows: i. ii. iii. The equipment will have no residual value when the lease term ends. The lease rental is determined on a 16% rate per annum. PSB agrees to pay all maintenance costs amounted to RM300 per year throughout the lease period. iv. Lease rental of RM15,264 per year is to be paid on 31 December each year for 5 years commencing 31 December 2021 and RM15,310 is to be paid on the last year of leasing agreement. The equipment was delivered on 1 January 2021 to PSB. Both companies adjust and close books on 31 December every year. PSB depreciates the equipment by using straight line method. The title of the equipment is to be passed to PSB at the end of the lease period. Required: a) Discuss the factors that would influence the management's decision to lease rather than purchase an asset. ' b) Prepare the related journal entries for the year 2021 in the book of LLSB and PSB -1
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter1: Introduction And Goals Of The Firm
Section: Chapter Questions
Problem 2.2CE
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Transcribed Image Text:Question 1
Luna Leasing Sdn Bhd (LLSB) agrees to provide Pali Sdn Bhd (PSB) with equipment under a
non cancelable lease for 6 years. The cost of equipment is RM65,264. It has an expected
useful life of 5 years. The lease terms are as follows:
i.
ii.
iii.
The equipment will have no residual value when the lease term ends.
The lease rental is determined on a 16% rate per annum.
PSB agrees to pay all maintenance costs amounted to RM300 per year throughout
the lease period.
iv. Lease rental of RM15,264 per year is to be paid on 31 December each year for 5
years commencing 31 December 2021 and RM15,310 is to be paid on the last year of
leasing agreement.
The equipment was delivered on 1 January 2021 to PSB. Both companies adjust and close
books on 31 December every year. PSB depreciates the equipment by using straight line
method. The title of the equipment is to be passed to PSB at the end of the lease
period.
Required:
a) Discuss the factors that would influence the management's decision to lease rather
than purchase an asset.
'
b) Prepare the related journal entries for the year 2021 in the book of LLSB and PSB
-1
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