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

Answer rating: 100% (QA)

Answers 1 JOURNAL ENTRIES OF PLATINO LESSEE AT INCEPTION 1 LEASE FROM COLTON DEBIT CREDIT Right of use asset 161880 Lease liability 161880 2 LEASE FROM MARISHA DEBIT CREDIT Right of use asset 83424 Le... View the full answer