1. Would the reporting by BBC Bhd differs from those reported by Gramhar Bhd and Ground...

 

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1. Would the reporting by BBC Bhd differs from those reported by Gramhar Bhd and Ground Bhd, and why (why not)? 2. Would COVID-19 pandemic impose any implication on the way BBC Bhd accounts for the two transactions above, and why (why not)? First transaction: BBC and Gramhar On 1 January 2020, BBC enters a contract with Gramhar Bhd, for a 2-year rental of 3 printers, a cutting system, and a copy machine. The machines will be returned to Gramhar Bhd at the end of the 2 years contract. The economic life of all the machines is 5 years. BBC will pay monthly payments of $5,000 for the following services: $/ Per month 4,700 200 Rental of all machines Maintenance of all machines Reimburse Gramhar Bhd's administration costs associated with the contract 100 Based on reviews of market information, BBC could have bought one printer for $59,000, a cutting system for $39,000 and a copy machine for $44,000 if they were purchased on cash basis. A third-party company provides similar maintenance services for $30 per machine per month. Second transaction: BBC and Ground A non-cancellable agreement was entered between BBC and Ground Bhd for 6 years, commencing on 1 January 2020 for a rental of plant and machinery located in Shah Alam, Selangor. Ground Bhd has several heavy plant and machinery for rental, and they typically rent them on the operating lease basis and no finance lease is given. The fair value of the plant and machinery rented by BBC was $1,000,000, and they are expected to have an economic life of 10 years. BBC plans to use the plant and machinery for only 6 years. The annual rental of the plant and machinery is $170,000 per annum, payable in arrears as of 31 December each year. The cost paid to the agent who manage the arrangement, which consist of a commission of $50,000, was borne by Ground Bhd. 1. Would the reporting by BBC Bhd differs from those reported by Gramhar Bhd and Ground Bhd, and why (why not)? 2. Would COVID-19 pandemic impose any implication on the way BBC Bhd accounts for the two transactions above, and why (why not)? First transaction: BBC and Gramhar On 1 January 2020, BBC enters a contract with Gramhar Bhd, for a 2-year rental of 3 printers, a cutting system, and a copy machine. The machines will be returned to Gramhar Bhd at the end of the 2 years contract. The economic life of all the machines is 5 years. BBC will pay monthly payments of $5,000 for the following services: $/ Per month 4,700 200 Rental of all machines Maintenance of all machines Reimburse Gramhar Bhd's administration costs associated with the contract 100 Based on reviews of market information, BBC could have bought one printer for $59,000, a cutting system for $39,000 and a copy machine for $44,000 if they were purchased on cash basis. A third-party company provides similar maintenance services for $30 per machine per month. Second transaction: BBC and Ground A non-cancellable agreement was entered between BBC and Ground Bhd for 6 years, commencing on 1 January 2020 for a rental of plant and machinery located in Shah Alam, Selangor. Ground Bhd has several heavy plant and machinery for rental, and they typically rent them on the operating lease basis and no finance lease is given. The fair value of the plant and machinery rented by BBC was $1,000,000, and they are expected to have an economic life of 10 years. BBC plans to use the plant and machinery for only 6 years. The annual rental of the plant and machinery is $170,000 per annum, payable in arrears as of 31 December each year. The cost paid to the agent who manage the arrangement, which consist of a commission of $50,000, was borne by Ground Bhd.

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