Question

(iv) On 1 April 2019, GHL entered into a sale and leaseback agreement for its manufacturing plant. The plant was originally acquired by GHL on 31 March 2009 for $8,910,000, at which point the plant had a useful life of 30 years with no residual value. The sale proceeds of plant from the sale and leaseback agreement were $11.25 million, which is higher than the fair value of the plant of $9.0 million. The plant was leased back on a 20-year lease from 1 April 2019 at an annual rental of $1,105,350 to be paid annually in arrears at 31 March 2020. The sale satisfies HKFRS 15 "Revenue from Contracts with Customers", however, she insisted to account for it as a financing arrangement. The first lease rental is paid and charged to the statement of profit or loss. The sales proceed was treated as a financial liability. The incremental borrowing rate is 15% per annum.

Prepare necessary adjusting entries to correct the errors on the issues (iv) in the financial statements of GHL for the year ended 31 March 2020 in accordance with relevant HKFRSs.