. ABC Sdn Bhd enters into a non-cancellable eight-years lease agreement with XYZ Sdn Bhd on 1 January 2019

. Details information: Lease item: Machinery, has a fair value of RM157,355. Economic life: ten years Residual value: Nil Bargain purchase option: ABC Sdn Bhd will be able to exercise at the end of ten years, for RM80,000.

XYZ Sdn Bhd manufactures the machinery.

Cost of the machinery: RM95,000. Eight annual payments:

RM25,000, first payment made on 31st December 2019.

Note: Included within the RM25,000 lease payments, there is an amount of RM2,500 representing payment for the insurance premium of the machinery.

Depreciated method: straight-line basis. Rate of interest implicit in the lease: 10% p.a.

The calculation of present value of minimum lease payments given by the XYZ is as follow:

(25,000 2,500) x 5.3349 = 120,035

80 000 x 0.4665 = 37,320

Present value of minimum lease payments 157,355

Required: a) Prepare the schedule of lease payment from year 2019 to 2021.

b) Prepare the journal entries for 1 January 2019, 31 December 2019 and 31 December 2020 in the books of Lessee.

c) Prepare extracts from the Statement of Profit or Loss and Statement of Financial Position for the year ended 31 December 2020 and its comparative figures, to disclose how the lease transactions be reflected in the respective financial statements, in the book of lessee.