Tukangful Berhad and Bank Andalusia Berhad signed an ijarah deal to lease equipment for three years. On
Question:
Tukangful Berhad and Bank Andalusia Berhad signed an ijarah deal to lease equipment for three years. On January 1, 2020, Bank Andalusia Berhad paid RM80,000 to a local vendor for equipment. Legal fees of RM2500 were also expended by the bank in connection with the ijarah contract, which the bank believed to be relevant.
The detail about the ijarah contract are as follows:
a) Number of instalments on quarterly basis 12
b) Rentals at the end of each quarter RM8,000
c) Estimated useful life 3 years
d) Estimated residual value at the end of useful life RM6,000
e) Estimated expenditure incurred in the 2nd year RM1,400
Additional information:
Fair value of equipment | RM |
At the beginning (1st January 2020) | 80,000 |
At the end of the lease (31st December 2022) | 4,000 |
Required:
Prepare journal entries to record the above ijarah contract in the books of Bank Shari’ah Berhad assuming the lease was treated as Ijarah Muntahia Bitamleek through sale for a token consideration (agreed to be equivalent to 50% of the estimated residual value at the end of useful life) for the following periods;
i. at the beginning of ijarah (3 marks)
ii. at the end of first year (3 marks)
iv. at the end of ijarah term (4 marks)
Intermediate Accounting IFRS
ISBN: 978-1119372936
3rd edition
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield