Bank Islam entered into an Ijarah contract with Tamrin Bhd to lease an equipment for a period of 4 years. The bank purchased an equipment from a local trader on the 1st of January 2003 for RM260,000. The bank also incurred legal fees of RM3,000 relating to the Ijarah contract which the bank considered to be material. Other detail about the Ijarah are as follows:   Fair value of the equipment:    At the beginning of 2003                                                        RM260,000    At the end of the lease i.e. 31 December 2006                     RM30,000 Number of instalment on bi-monthly basis                                   24 Rentals at the end of every two months                                   RM15,000 Estimated useful life                                                                  4 years Estimated residual value at the end of useful life                     RM20,000 Estimated expenditure incurred in second year                       RM15,000         Required:   Prepare journal entries to record the above Ijarah contract in the book of Bank Islam for four years of the contract.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Bank Islam entered into an Ijarah contract with Tamrin Bhd to lease an equipment for a period of 4 years. The bank purchased an equipment from a local trader on the 1st of January 2003 for RM260,000. The bank also incurred legal fees of RM3,000 relating to the Ijarah contract which the bank considered to be material. Other detail about the Ijarah are as follows:

 

Fair value of the equipment:

   At the beginning of 2003                                                        RM260,000

   At the end of the lease i.e. 31 December 2006                     RM30,000

Number of instalment on

bi-monthly basis                                   24

Rentals at the end of every two months                                   RM15,000

Estimated useful life                                                                  4 years

Estimated residual value at the end of useful life                     RM20,000

Estimated expenditure incurred in second year                       RM15,000

 

 

 

 

Required:

 

  1. Prepare journal entries to record the above Ijarah contract in the book of Bank Islam for four years of the contract. 
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