Question
Daly bhd. is a leasing company that enters into 5-year lease (that does not allow cancellation) for equipment with Krause Bhd. on 1 january 2019.
Daly bhd. is a leasing company that enters into 5-year lease (that does not allow cancellation) for equipment with Krause Bhd. on 1 january 2019. The equipment has an estimated life of 6 years and a fair value of RM 1,800,00 at the commencement of the lease. in addition, the leased equipment is of a specialized nature such that only Krause Bhd. can use the equipment without major modifications being made. The lease contains the following provisions:
rental payments of RM 200,000, payable at the beginning of each 6-month period, throughout the lease period.
it is expected that Daly Bhd. will realize rm 100,000 from selling the assets at the expiration of the lease. however, the actual residual value is expected to be rm60,000. the residual value is not guaranteed by Klause Bhd. Krause's incremental borrowing rate is 8%. Krause uses the straight line method to depreciate its assets.
(a) related journal entries for the year 2019 in the books of Krause Bhd ( include amortization schedule through 1 January 2020)
(b) prepare the statements of profit or loss and statements of financial position as at 31 December 2020
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