Show the journal entries at the commencement of the leasein

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Reference no: EM132652374

Padu Bhdsells an office building toGlobal Sdn Bhdfor cashof RM31,000,000. Immediately before the transaction, the building is carriedata cost of RM20,000,000. At the same time, Padu Bhdenters into a contractwith Global Sdn Bhdfor the right-of-use the building for 15years with annual payments of RM1,600,000 payable at the end of each year. The transfer of the office building qualifies as a sale under MFRS 15. The fair value of the office building on the date of sale is RM28,000,000. Since the consideration for the sale of the office building is not at fair value, Padu Bhd and GlobalSdn Bhd. made adjustments to recognize thetransaction at fair value. The incremental borrowing rate of the lessee is 5.5% per annum. The present value of the annual payments is RM16,060,130of which RM3,000,000 relates to the additional financing and RM13,060,130relates to the lease.

Required:

Question 1: Show the journal entries at the commencement of the leasein accordance with MFRS 16 Leasing.

Reference no: EM132652374

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