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.
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.
Step by step
Solved in 3 steps with 6 images
