Platino Bhd leases the following assets from three lessors. The assets are to be used in the
Question:
Platino Bhd leases the following assets from three lessors. The assets are to be used in the property development of the company. The details of the assets are as follows:
Lessor | Colton Bhd | Marisha Bhd | Tinker Bhd |
Type of asset | Excavator | Truck | Crane |
Yearly rental | RM15,000 (first payment on 31 December 2020) | RM12,000 (first payment on 28 February 2021) | RM10,000 (first payment on 30 June 2020) |
Inception date | 1 January 2020 | 1 March 2020 | 1 July 2019 |
Lease term | 10 years | 7 years | 5 years |
Estimated economic life | 20 years | 9 years | 10 years |
Purchase option | RM75,000 at end of year 10. | None | None |
Renewal option | None | None | None |
Fair value at the inception of lease | RM220,000 | RM150,000 | RM55,000 |
Guaranteed residual value | -0- | RM15,000 | RM10,000 |
Estimated residual value at end of lease term | RM90,000 | RM11,000 | RM10,000 |
Implicit rate | 5% | 4% | 4% |
CASE INSTRUCTIONS:
1. Prepare journal entries for Platino Bhd at the inception date of each lease.
2. For each of the assets, provide an analysis to determine the type of lease for lessor using the following schedule.
Transfer of title? | Yes/No |
Contain purchase option? | |
Economic life test | |
PV of lease payment equals at least substantially all of FV of the leased asset? | |
Type of lease |