HMH Bhd. arranges to lease a piece of vaccination equipment from MM Care Bhd. MM Care Bhd. is a company that offers a broad range of medical equipment for leasing to meet the needs of private and public hospitals. It deals with a wide array of items including clinical information equipment, anesthetic machines, patient monitoring equipment, and x-ray equipment. MM Care Bhd. leased a piece of vaccination equipment to HMH Bhd. on 1 July 2019. The estimated useful life of the machine is six years and there was no mention of residual value. Five annual lease payments of RM150,000 are due at the end of each financial year. The lease rental was calculated and mutually agreed upon a 5% rate of return to MM Care Bhd. At the end of the lease term, the ownership of the machine will be transferred to the HMH Bhd. and HMH Bhd. is also required to pay for all the repairs and maintenance of the vaccination equipment. As part of their accounting policy, MM Care Bhd. and HMH Bhd. uses the straight-line method to depreciate all their property, plant, and equipment Each company makes up its accounts to 30 June 2020. The present values of a single payment of RM1 and the present values of annuities of RM1 received at the end of the year are as follows: Year 1 2 3 4 5 Single Payment 0.9524 0.9070 0.8638 0.8227 0.7835 Annuities 0.9524 1.8334 2.7232 3.5460 4.3295 Required: a. Briefly explain the major differences between MFRS 117 Leases and MFRS 16 Leases in respect of lessee accounting (4 marks) b. Calculate the present value of the lease payment and prepare the amortization schedule for HMH Bhd. to show the allocation of the finance charge. (8 marks) c. Provide journal entries in the books of HMH Bhd. for the year ended 30 June 2020. (6 marks) d. Prepare an extract of the financial statement in the books of HMH Bhd. for the year ended 30 June 2020. (7 marks) QUESTION 3 (25 MARKS) The following are the draft statements of the financial position of JDJ Bhd. and its subsidiary, HSA Sdn. Bhd. as at 31 December 2020. JDJ Bhd. RM RM HSA Sdn. Bhd. RM RM Non-Current Assets Property, Plant, and Equipment Investment in HSA Sdn. Bhd. 161,000 85,000 229,000 85,000 Current Assets Inventory Trade receivables Cash and cash equivalent Total Assets 56,200 107,500 7.700 36,200 45,800 25,200 171,400 400,400 107,200 192,200 HMH Bhd. arranges to lease a piece of vaccination equipment from MM Care Bhd. MM Care Bhd. is a company that offers a broad range of medical equipment for leasing to meet the needs of private and public hospitals. It deals with a wide array of items including clinical information equipment, anesthetic machines, patient monitoring equipment, and x-ray equipment. MM Care Bhd. leased a piece of vaccination equipment to HMH Bhd. on 1 July 2019. The estimated useful life of the machine is six years and there was no mention of residual value. Five annual lease payments of RM150,000 are due at the end of each financial year. The lease rental was calculated and mutually agreed upon a 5% rate of return to MM Care Bhd. At the end of the lease term, the ownership of the machine will be transferred to the HMH Bhd. and HMH Bhd. is also required to pay for all the repairs and maintenance of the vaccination equipment. As part of their accounting policy, MM Care Bhd. and HMH Bhd. uses the straight-line method to depreciate all their property, plant, and equipment Each company makes up its accounts to 30 June 2020. The present values of a single payment of RM1 and the present values of annuities of RM1 received at the end of the year are as follows: Year 1 2 3 4 5 Single Payment 0.9524 0.9070 0.8638 0.8227 0.7835 Annuities 0.9524 1.8334 2.7232 3.5460 4.3295 Required: a. Briefly explain the major differences between MFRS 117 Leases and MFRS 16 Leases in respect of lessee accounting (4 marks) b. Calculate the present value of the lease payment and prepare the amortization schedule for HMH Bhd. to show the allocation of the finance charge. (8 marks) c. Provide journal entries in the books of HMH Bhd. for the year ended 30 June 2020. (6 marks) d. Prepare an extract of the financial statement in the books of HMH Bhd. for the year ended 30 June 2020. (7 marks) QUESTION 3 (25 MARKS) The following are the draft statements of the financial position of JDJ Bhd. and its subsidiary, HSA Sdn. Bhd. as at 31 December 2020. JDJ Bhd. RM RM HSA Sdn. Bhd. RM RM Non-Current Assets Property, Plant, and Equipment Investment in HSA Sdn. Bhd. 161,000 85,000 229,000 85,000 Current Assets Inventory Trade receivables Cash and cash equivalent Total Assets 56,200 107,500 7.700 36,200 45,800 25,200 171,400 400,400 107,200 192,200