On 1 January 2017, Abracadabra Bhd entered into a 5-year franchise agreement with Yoohuu Bhd to operate a health club and spa in Pulau Lang Tengah. At that time, the company has to pay RM500,000 for rights to use the franchisors logo and technique. Besides, Abracadabra Bhd paid Yoohuu Bhd RM1,500,000 for special equipment to be used in the health club and spa. The equipment can be purchased separately by the holders of the franchise only. The equipment has a useful life of 5 years.

Explain briefly the accounting treatment for the year ended 31 December 2017 in each of the above situations. Justify your answer with appropriate journal entries.