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Lapricorn Bhd. enters into a leasing agreement with Tetricome Bhd. on 1 January 2019 for...

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Accounting

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Lapricorn Bhd. enters into a leasing agreement with Tetricome Bhd. on 1 January 2019 for an equipment costing RM110,000. The lease agreement requires payment of five annual rents of RM25,000 each, payable in arrears at the end of the respective years. After the end of the primary lease period, the lessee has the right to purchase the asset at a bargain price of RM20,000. At the date of the lease agreement, Lapricorn Bhd. is reasonably certain that it will exercise the right to purchase the equipment at the end of the lease term. The lease cannot be cancelled. The title of the equipment is to be passed to Lapricorn Bhd. at the end of the lease period. Lapricorn Bhdbelieves that the equipment will last for 8 years and will have no residual value at the end of that period, It depreciates assets of this type on a straight-line method. Lapricorn Bhd. engages the lessor to service the equipment, paying a servicing fee of RM5,000 per year. The implicit interest rate is 10% per annum. Required: Assuming Lapricorn Bhd. applies Paragraphs 22-49 of MFRS 16: (a) Determine the amount that shall be recorded on initial recognition of the equipment

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