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Bank Shari'ah provides m

Bank Shari'ah provides m

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Bank Shari'ah provides musharaka mutanaqisah financing to Crescent Corporation for a house development project amounting to $10,000,000. This amount represents 75% of the total project costs. The term of financing is for 5 years and the partner is required to pay back the bank in 5 equal installments yearly. The profit-sharing ratio is agreed at 30: 70 (Partner: Bank) and assumed to be constant for the first 2 years of the project. For the next three years, the profit-sharing ratio is agreed to be 25: 75 (Partner: Bank). The profits or losses from the project as disclosed by the partner are as follows: Year 1 2 3 4 5 Profit/(Loss) $ (1, 500,000) (1, 200,000) 2,500,000 1,500,000 1,500,000 You are required to determine the profits or losses to be recognized by both Bank Shari'ah and Crescent Corporation from Year 1 to Year 5.
Transcribed Image Text:Bank Shari'ah provides musharaka mutanaqisah financing to Crescent Corporation for a house development project amounting to $10,000,000. This amount represents 75% of the total project costs. The term of financing is for 5 years and the partner is required to pay back the bank in 5 equal installments yearly. The profit-sharing ratio is agreed at 30: 70 (Partner: Bank) and assumed to be constant for the first 2 years of the project. For the next three years, the profit-sharing ratio is agreed to be 25: 75 (Partner: Bank). The profits or losses from the project as disclosed by the partner are as follows: Year 1 2 3 4 5 Profit/(Loss) $ (1, 500,000) (1, 200,000) 2,500,000 1,500,000 1,500,000 You are required to determine the profits or losses to be recognized by both Bank Shari'ah and Crescent Corporation from Year 1 to Year 5.
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