EXERCISE IN CLASS

1. What is the major change in accounting for leases introduced by new accounting
standard of MFRS 16?

2. On 1 July 2019, True Bhd leased a plastic-moulding machine from Grit Ltd. The
machine cost Grit RM130,000 to manufacture and having a fair value of RM154,
109 on 1 July 2019. The lease agreement contain a following provisions

Lease Term 4 years

Annual Rental payment RM 41,500
Residual value at the end of lease term RM 15,000
Residual guranteed by lessee Nil
Interest rate implicit 8%
The lease is cancellable only with the permission of the lessor

The expected useful life of the assets is 6 years. True Bhd intend to return to
Grit Ltd at the end of the lease term. Included in the annual rental payment is
an amount of RM1,500 to cover the cost of maintenance and insurance made for
by the lessor.

Required:

i. Prepare the lease payments schedule for the True Bhd.

ii. Prepare the journal entries in the book of True Bhd for the year ended 30
June 2020.

3. Oceans Bhd. manufactures specialised moulding machine for both sale and lease.
On 1 July 2020, Oceanes leased the machine to Eleven Bhd. The machine being
leased by cost Oceans Bhd RM 195,000 to make and its fair value at 1 July 2020 is
considerd to be RM 212,515. The term of lease is as follows :

Lease Term, is for 5 years starting on 1 July 2020

Annual lease payment, payable on 30 June every year RM 57,500
Estimated useful life of machine (scrap value RM 2,500) 8 years
Estimated residual value at the end of lease term RM 37,000
Residual guranteed by Eleven Bhd RM 25,000
Interest rate implicit 10 %
The annual lease payment include an amount of RM7,500 to cover the annual
cost of maintenance and insurance
Eleven Bhd may cancel the lease only with the permission of the lessor
Eleven Bhd tend to lease another machine from Oceans at the end of the lease
term.

Required:
i. Classify the lease in Ocean Bhd
ii. Prepare the lease receipt schedule for Ocean Bhd. and a journal entries
required as at 30 June 2021
iii. Assuming that Ocean Bhd can cancel the lease without incurring any
penalties. Show relevant journal entries as at 30 June 2021.