On 1 January 2020, Jati entered into a contract of three-year lease for a forklift. The contract contains an option to extend the lease term for a further two years. Jati is not reasonably certain to exercise this option. The useful life of the forklift is estimated to be 20 years.

Lease payments are RM15,000 per year for the initial terms and RM20,000 per year for the option period. All payments are paid at the beginning of the year. To obtain the lease, Jati incurs initial direct costs of RM1,000 and is immediately reimbursed RM500 by the lessor.

The incremental borrowing rate of Jati is 10%.

Required:

Provide the double entries needed to record the above transactions as at 1 January 2020. Show all the necessary workings.