Question 1Luna Leasing Sdn Bhd (LLSB) agrees to provide Pali Sdn Bhd (PSB) with equipment under anon cancelable lease for 6 years. The cost of equipment is RM65,264. It has an expecteduseful life of 5 years. The lease terms are as follows:i.ii.iii.The equipment will have no residual value when the lease term ends.The lease rental is determined on a 16% rate per annum.PSB agrees to pay all maintenance costs amounted to RM300 per year throughoutthe lease period.iv. Lease rental of RM15,264 per year is to be paid on 31 December each year for 5years commencing 31 December 2021 and RM15,310 is to be paid on the last year ofleasing agreement.The equipment was delivered on 1 January 2021 to PSB. Both companies adjust and closebooks on 31 December every year. PSB depreciates the equipment by using straight linemethod. The title of the equipment is to be passed to PSB at the end of the leaseperiod.Required:a) Discuss the factors that would influence the management's decision to lease ratherthan purchase an asset.'b) Prepare the related journal entries for the year 2021 in the book of LLSB and PSB-1

Question 1a: Factors Influencing Lease vs Purchase DecisionSeveral factors can influence…

Answered: Question 1 Luna Leasing Sdn Bhd (LLSB)…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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