Reference no: EM133074964

Question - On 1 January 2019, Cipro Bhd. enterered into a lease arrangement with Doxy Bhd., a company that sells and leases out equipment that produced antibiotics. The lease is non-cancellable. The followings are information related to the equipment that is being leased;

i. At the inception of the lease, the fair value of the equipment is RM60,000.

ii. The residual value of the equipment is RM7,000.

iii. The useful life of the equipment is 6 years.

The followings are details related to the lease arrangement:

i. Lease rental is RM14,000, payable annually on 31 December every year.

ii. The lease period is for 5 years beginning on 1 January 2019.

iii. The residual value of the equipment is guaranteed by Cipro Bhd.

iv. Interest rate implicit in the lease is 10%.

Also, Cipro Bhd. incurred costs of RM8,400 for the commission and legal fees in negotiating and arranging the lease in January 2019. The costs are charged to the statement of profit or loss statement in the year it is incured. Cipro Bhd. uses straight-line depreciation method for all equipment.

Required -

a) Prepare the related journal entries for the year 2019 for Cipro Bhd.

b) Prepare extract of Cipro Bhd's Statement of Profit and Loss and Other Comprehensive Income for the year ended 31 December 2020.

c) Prepare extract of Cipro Bhd's Statement of Financial Position as at 31 December 2020 (exclude the notes to the financial statement in relation to the lease).