16. Fundo entered into a 20-year operating lease for a property on 1 October x00 which has a remaining life of eight years at 1 October 12. The rental payments are RM2.3 million per annum. Prior to 1 October 12, Fundo obtained permission from the owner of the property to make some internal alterations to the property so that it can be used for a new manufacturing process which Fundo is undertaking. The cost of these alterations was RM7 million and they were completed on 1 October x12 (the time taken to complete the alterations can be taken as being negligible). A condition of being granted permission was that Fundo would have to restore the property to its original condition before handing back the property at the end of the lease. The estimated restoration cost on 1 October 12, discounted at 8% per annum to its present value, is RM5 million. Required: a. Explain how the lease, the alterations to the leased property and the restoration costs should be treated in the financial statements of Fundo for the year ended 30 September x13. b. Prepare extracts from the financial statements of Fundo for the year ended 30 September xl3 reflecting your answer to (a) above. (Adapted from ACCA) 16. Fundo entered into a 20-year operating lease for a property on 1 October x00 which has a remaining life of eight years at 1 October 12. The rental payments are RM2.3 million per annum. Prior to 1 October 12, Fundo obtained permission from the owner of the property to make some internal alterations to the property so that it can be used for a new manufacturing process which Fundo is undertaking. The cost of these alterations was RM7 million and they were completed on 1 October x12 (the time taken to complete the alterations can be taken as being negligible). A condition of being granted permission was that Fundo would have to restore the property to its original condition before handing back the property at the end of the lease. The estimated restoration cost on 1 October 12, discounted at 8% per annum to its present value, is RM5 million. Required: a. Explain how the lease, the alterations to the leased property and the restoration costs should be treated in the financial statements of Fundo for the year ended 30 September x13. b. Prepare extracts from the financial statements of Fundo for the year ended 30 September xl3 reflecting your answer to (a) above. (Adapted from ACCA)