On 1 July 2019 Syed Islamic Bank entered into a Salam financing contract with Jati Rice...

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On 1 July 2019 Syed Islamic Bank entered into a Salam financing contract with Jati Rice Sdn. Bhd. where the company need to deliver 110 tonnes of rice on 1 December 2019 at a price of RM1,510 per tonne. On 15 July 2019, the bank entered into a Parallel Salam contract to supply 110 tonnes of rice to Wang Solo Sdn. Bhd. The rice received from Jati Rice Sdn. Bhd. will be delivered to Wang Solo Sdn. Bhd. at a price of RM1,610 per tonne on 15 December 2019. However, on the date agreed, Jati Rice Sdn Bhd only able to deliver 80 tonnes of rice. Therefore, the bank needed to buy the remaining balance of 30 tonnes of rice from the open market at a price of RM1,560 per tonne. The bank will bear the difference between the market price and the Salam contract. On 15 December 2019, Syed Islamic Bank delivered 110 tonnes of rice to Wang Solo Sdn. Bhd. as agreed. (a) Record the journal entries for the Salam and Parallel Salam financing in the books of Syed Islamic Bank. (18 marks) (b) Illustrate the diagrams for Salam Financing and Parallel Salam Financing indicating the flow of money and products based on Question 3 (a) scenario. (5 marks) (c) Do Malaysian Islamic banks practice Salam financing? If yes, please state which Malaysian Islamic bank and what type of products they apply. (2 marks) On 1 July 2019 Syed Islamic Bank entered into a Salam financing contract with Jati Rice Sdn. Bhd. where the company need to deliver 110 tonnes of rice on 1 December 2019 at a price of RM1,510 per tonne. On 15 July 2019, the bank entered into a Parallel Salam contract to supply 110 tonnes of rice to Wang Solo Sdn. Bhd. The rice received from Jati Rice Sdn. Bhd. will be delivered to Wang Solo Sdn. Bhd. at a price of RM1,610 per tonne on 15 December 2019. However, on the date agreed, Jati Rice Sdn Bhd only able to deliver 80 tonnes of rice. Therefore, the bank needed to buy the remaining balance of 30 tonnes of rice from the open market at a price of RM1,560 per tonne. The bank will bear the difference between the market price and the Salam contract. On 15 December 2019, Syed Islamic Bank delivered 110 tonnes of rice to Wang Solo Sdn. Bhd. as agreed. (a) Record the journal entries for the Salam and Parallel Salam financing in the books of Syed Islamic Bank. (18 marks) (b) Illustrate the diagrams for Salam Financing and Parallel Salam Financing indicating the flow of money and products based on Question 3 (a) scenario. (5 marks) (c) Do Malaysian Islamic banks practice Salam financing? If yes, please state which Malaysian Islamic bank and what type of products they apply. (2 marks)

Answer rating: 100% (QA)

a Journal entries AmountRM AmountRM Dr Salam financing 1510110 166100 Cr Cash ... View the full answer