Reference no: EM132875848

Questions-

(a) Maggie Pierce company enters into a 4-year lease commencing on 1 January 2017 (and useful life of the asset is 4 years). The terms are 4 payments of RM 100,000, commencing on 1 January 2017, and annually thereafter. The interest rate implicit in the lease is 7.5% and the present value of lease payments at 1 January 2017 (ie 4 payments of RM 50,000) discounted at that rate is RM 360,052. Legal costs to set up the lease incurred by Jade company were RM 804.

Required -

i. Calculate the present value of the lease payment.

ii. Calculate the depreciation charges.

iii. Calculate the amortization schedule for interest expenses.

(b) Alex Bhd enters into a 10-year contract with Sloan Bhd, a ship owner, for the use of an identified ship. Alex Bhd decides whether and what cargo will be transported; when and to which ports the ship will sail throughout the period of use, subject to restrictions specified in the contract. These restrictions prevent Sloan Bhd from sailing the ship into waters at a high risk of piracy or carrying explosive materials as cargo. Sloan Bhd operates and maintains the ship and is responsible for safe passage.

Required - Determine whether the contract between Alex Bhd and Sloan Bhd is contain a lease and can be classified under MFRS 16.