HJH Bhd. is a rapidly expanding business involved in the biotechnological industry. On 1 January 2020, HJH Bhd. signed a lease agreement to lease a water purification machine with YJY Bhd. YJY Bhd. has various water purification machines that can meet the requirement of the HJH Bhd. However, the contract only stated the specific type of water purification machine to be leased out by HJH Bhd. In addition, the contract also mentioned that YJY Bhd. should substitute with a similar water purification machine to HJH Bhd if the leased-out water purification machine breaks down. The contract has additional terms and conditions as follows: 1. HJH Bhd. has the right to decide how to operate the machine, when, or whether it is used and what it is used for. HJH Bhd. has hired a few engineers to operate the water purification machine. 2. The present value of the minimum lease payment of the water purification machine is RM649,425. This amount does not include the initial payment made by HJH Bhd. on 1 January 2020 amounted to RM10,000. On the same day, HJH Bhd. paid an initial direct cost of legal and inception costs amounted to RM5,000. 3. HJH Bhd. must make five annual lease payments of RM150,000 at the end of each financial year. HJH Bhd. is also required to pay for all the repairs and maintenance of the water purification machine. 4. The water purification machine has an estimated useful life of five years. It is the policy of both companies to adopt a cost model and use the straight-line method to depreciate all their property, plant, and equipment. 5. The interest rate implicit in the lease was calculated and mutually agreed upon 5% rate of return to YJY Bhd. 6. At the end of the contract term, the water purification machine will remain the YJY Bhd.'s asset. Each company makes up its accounts to 31 December each year. Required: a. Advise whether the above contract between HJH Bhd. and YJY Bhd. contains a lease under MFRS 16 Leases. (5 marks) b. Determine the amount that shall be recorded on the initial recognition of the water purification machine. (3 marks) c. Prepare the lease amortization schedule for HJH Bhd. to show the allocation of the finance charge. (5 marks) d. Provide journal entries to record the above transactions for the first two years in the books of HJH Bhd. (6 marks) e. Prepare the extract of the financial statement for the year ended 31 December 2021 in the books of HJH Bhd. (6 marks) HJH Bhd. is a rapidly expanding business involved in the biotechnological industry. On 1 January 2020, HJH Bhd. signed a lease agreement to lease a water purification machine with YJY Bhd. YJY Bhd. has various water purification machines that can meet the requirement of the HJH Bhd. However, the contract only stated the specific type of water purification machine to be leased out by HJH Bhd. In addition, the contract also mentioned that YJY Bhd. should substitute with a similar water purification machine to HJH Bhd if the leased-out water purification machine breaks down. The contract has additional terms and conditions as follows: 1. HJH Bhd. has the right to decide how to operate the machine, when, or whether it is used and what it is used for. HJH Bhd. has hired a few engineers to operate the water purification machine. 2. The present value of the minimum lease payment of the water purification machine is RM649,425. This amount does not include the initial payment made by HJH Bhd. on 1 January 2020 amounted to RM10,000. On the same day, HJH Bhd. paid an initial direct cost of legal and inception costs amounted to RM5,000. 3. HJH Bhd. must make five annual lease payments of RM150,000 at the end of each financial year. HJH Bhd. is also required to pay for all the repairs and maintenance of the water purification machine. 4. The water purification machine has an estimated useful life of five years. It is the policy of both companies to adopt a cost model and use the straight-line method to depreciate all their property, plant, and equipment. 5. The interest rate implicit in the lease was calculated and mutually agreed upon 5% rate of return to YJY Bhd. 6. At the end of the contract term, the water purification machine will remain the YJY Bhd.'s asset. Each company makes up its accounts to 31 December each year. Required: a. Advise whether the above contract between HJH Bhd. and YJY Bhd. contains a lease under MFRS 16 Leases. (5 marks) b. Determine the amount that shall be recorded on the initial recognition of the water purification machine. (3 marks) c. Prepare the lease amortization schedule for HJH Bhd. to show the allocation of the finance charge. (5 marks) d. Provide journal entries to record the above transactions for the first two years in the books of HJH Bhd. (6 marks) e. Prepare the extract of the financial statement for the year ended 31 December 2021 in the books of HJH Bhd. (6 marks)