RyZ Bhd . had entered into a contract on 1 July 2 0 2 2 to lease
Question:
RyZ Bhd had entered into a contract on July to lease a building at Lot from its owner, Shank Bhd for five years with an option to extend the lease for another five years. On this date, RyZ Bhd had paid an initial deposit of RM which was not refundable but can be offset against the last rental payable. The yearly rental in the first five years was RM payable in arrears at the end of each year commencing in and RyZ Bhd had no intention to extend the lease. The lifts in the building have an economic useful life of five years. At the end of the lease, Route Bhd was required to replace all the lifts in the building before handing it back to the owner. The estimated replacement costs at the end of the lease period discounted to present period were RM while legal fees and other replacement costs incurred was RM The implicit interest rate in lease was per annum and the relevant discount factors are as follows:
Period
Discount factor @
Required:
Briefly explain how RyZ Bhd shall treat the lease building.
Fundamentals of Advanced Accounting
ISBN: 978-0077667061
5th edition
Authors: Joe Ben Hoyle, Thomas Schaefer, Timothy Doupnik