QUESTION 1

A. EQUIP Bhd is a supplier of factory machinery. Categorise each of the following leases into operating or finance lease and briefly explain your choice.

(i) A 5-year lease of custom-made machinery to AGRO Sdn Bhd. The useful life of the machine is 10 years.

(ii) An 8-year lease of four machines to BURGA Enterprise. The useful life of the machine is 10 years.

(iii) A 5-year lease of four machines to CARTEL Bhd. The useful life of the machine is 10 years. At the end of the lease, the ownership will be transferred to CARTEL Bhd.

(iv) A 4-year lease of a machine to DUGRO Bhd for RM12,000 yearly. The fair value of the machine is RM40,000.

(8 marks)

B. Briefly explain the concept of lease under Al-Ijarah Thumma Al-Bai (AITAB).

(6 marks)

C. Briefly explain the concept of financial instrument under Sukuk Mudharabah.

(6 marks)

A. EQUIP Bhd is a supplier of factory machinery. Categorise each of the following leases into operating or finance lease and briefly explain your choice.

(i) A 5-year lease of custom-made machinery to AGRO Sdn Bhd. The useful life of the machine is 10 years.

(ii) An 8-year lease of four machines to BURGA Enterprise. The useful life of the machine is 10 years.

(iii) A 5-year lease of four machines to CARTEL Bhd. The useful life of the machine is 10 years. At the end of the lease, the ownership will be transferred to CARTEL Bhd.

(iv) A 4-year lease of a machine to DUGRO Bhd for RM12,000 yearly. The fair value of the machine is RM40,000.

(8 marks)

B. Briefly explain the concept of lease under Al-Ijarah Thumma Al-Bai (AITAB).

(6 marks)

C. Briefly explain the concept of financial instrument under Sukuk Mudharabah.

(6 marks)

QUESTION 2

QUESTION 2 (20 MARKS)

On 1 January 2018 FILHO Bhd enters into a 6-year contract to lease a machinery to PKNP Bhd. The followings are the information of the lease:

(i) The cost of the equipment is RM150,000, useful life is 8 years and the residual value is estimated at RM30,000.

(ii) Annual lease payments of RM25,000 are made at the end of each year.

(iii) The implicit interest rate is 9 percent.

(iv) The residual value guaranteed by PKNP is RM20,000.

Required:

For FILHO Bhd

1. On 1 January 2018, determine the value of:

1. Investment in lease
2. Cost of sales of the lease
3. Revenue from the lease
4. Gross profit from the lease

2. Show the journal entry on 31 December 2018.
3. Determine the value of the investment in lease on 31 December 2019.

For PKNP Bhd

4. Show the journal entry on 1 January 2018.
5. Assuming the company uses straight line method of depreciation, show all the journal entries on 31 December 2018.
6. Determine the value of lease liability and carrying amount of lease machinery on 31 December 2019

QUESTION 3

QUESTION 3 (20 MARKS)

LEGO Berhad subscribes 1,000 units of bond issued by TRIUMP Berhad on 1 July 2018 at RM7,606.92 per unit. The face value of the bond is RM8,000 per unit with 10 percent coupon rate payable on 30 June and 31 December every year. The bond will mature on 30 June 2021. The current effective rate of interest is 12 percent.

Required:

Using amortised cost method,

1. Show the journal entry on 1 July 2018.
2. Prepare the amortised cost table for the bond.
3. Show the journal entry on 31 December 2018.

Additional information:

The total transaction cost on the subscription of bond is RM8,000 and the fair value of the bond as at 31 December 2018 is RM7,810 per unit.

Required:

Using fair value through profit or loss method,

4. Show the journal entry on 1 July 2018.
5. Show the journal entry on 31 December 2018.

Using fair value through other comprehensive income method,

6. Show the journal entry on 1 July 2018.

Show the journal entry on 31 December 2018