certain that it will exercise the right to purchase the equipment at the end of the lease (e) Show the charges in the Statement of Profit or Loss from year 2015 until year 2019 unung treatment upon 3 Lapricorn Bhd. enters into a leasing agreement with Tetricome Bhd. on 1 January 2015 for an equipment costing RM110,000. The lease agreement requires payment of five annual end of the primary lease period, the lessee has the right to purchase the asset at a bargain price of RM20,000. At the date of the lease agreement, Lapricorn Bhd. is reasonably term. The lease is non-cancelable. The title of the equipment is to be passed to Lapricorn Bhd. at the end of the lease period. Lapricorn Bhd. believes that the equipment will last for eight years and will have no residual value at the end of that period. It depreciates assets of this type on a straight-line method. Lapricorn Bhd. engages the lessor to service the equipment, paying a servicing fee of RM5,000 per year. The implicit interest rate is 10% per annum Required: (a) Determine whether the lease is a finance lease or an operating lease. (b) Determine the amount that shall be recorded on initial recognition of the equipment (c) Calculate the total finance charge of the lease. (d) Prepare the journal entries for the year 2015. 26 CHAPTER 7 | Leases