Tiung Bhd. owns some equipment acquired on lease on January 1, 2023. The following is information related to the equipment obtained:

1. Scanning machine

This machine is leased from Kedidi Bhd. with the following terms:

a) The lease agreement cannot be canceled.

b) The lease is for a period of 8 years. The useful life of the machine is 10 years.

c) The market price of the machine is RM300,000 with an estimated residual value as much as RM10,000.

d) A lease payment of RM50,000 must be made at the beginning of each year the year 2023.

e) The lease is designated as a lease with a guarantee but Tiung Bhd. estimated the residual value of the machine to be RM8,000.

f) Interest rate for Tiung Bhd. is 8% while Kedidi Bhd. 10% and rates which is used by Kedidi Bhd. known by Tiung Bhd.

2. Therapy equipment

a) This therapy equipment has been sold to Merak Bhd. with a price of RM450,000 and then leased again. This sale transaction meets the requirements of MFRS 15: Revenue.

b) The fair value of the equipment on 1 January 2023 is RM450,000 with a useful life 10 years.

c) The carrying value of the equipment as recorded in Tiung Bhd's records. is RM400,000.

d) The lease period is 3 years and cannot be cancelled.

e) Ownership does not transfer to Tiung Bhd. at the end of the lease period.

f) The residual value at the end of the lease period is estimated at RM350,000 and is not guaranteed.

g) Lease payments amounting to RM95,500 must be made at the beginning of each year the year 2023.

h) The interest rate used by Tiung Bhd. and Merak Bhd is 8%.

You are required:

a) For Tiung Bhd;

i) Discuss two reasons why machinery and equipment transactions are recognized as lease.

ii) Prepare journal entries when all lease contracts are signed. Show it calculations clearly.

iii) Prepare an amortization schedule for all lease contracts until maturity.

iv) Prepare an adjusting entry on 31 December 2023.

b) For Merak Bhd;

i) State the type of lease to Tiung Bhd. and give reasons.

ii) Prepare a journal entry when the lease contract is agreed. Show calculations clearly.

iii) Prepare an adjusting entry on 31 December 2023.