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Gong Badak Medical Centre (GBMC), a newly set-up hospital, leases an electronic digital scanning machine...

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Gong Badak Medical Centre (GBMC), a newly set-up hospital, leases an electronic digital scanning machine from PP Bhd. The machine has an estimated life of 12 years; the lease is for a period of 10 years. The normal selling price is RM859,335, and its guaranteed residual value at the end of the lease term (that allows cancellation) is estimated to be RM37,500. GBMC will pay rents of RM 125,000 at the beginning of each year and all the maintenance and insurance costs. PP Bhd. incurred a cost of RM525,000 in manufacturing the machine, and RM35,000 in negotiating and closure of the lease. PP Bhd. has determined that GBMC is a very reliable client. No other costs will be incurred and implicit interest rate is 10%. Required: (a) Discuss the nature of this lease in relation to PP Bhd

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