ISLAMIC BANKING AND FINANCE

ASSIGNMENT 2

INSTRUCTIONS:

 ATTEMPT ALL QUESTIONS

 PLAGIARISM AND CHEATING IS STRICTLY FORBIDDEN
 IT IS TO BE DONE INDIVIDUALLY, HAND WRITTEN AND HANDED IN ON 9TH OCTOBER 2018
DURING CLASS.

Q1.

Bank Syari’ah Berhad entered into an Ijarah contract with Mahabbah Sdn. Bhd. to lease
equipment for a period of 3 years. The Bank purchased equipment from a local trader on the 1st of
January 2000 for $160,000.
Other details about the Ijarah are as follows:

 Fair value of equipment: At the beginning of 2000 was $160,000, at the end of the lease
i.e. 31 December 2002 was $ 20,000
 Number of installments on bi-monthly basis : 18
 Rentals at the end of every two months: $12,000
 Estimated useful life 3 years
 Estimated residual value at the end of useful life $16,000
 Estimated expenditure incurred in the second year $12000

Prepare journal entries to record the above Ijarah contract in the books of Bank Syari’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)

The journal entries should cover the following periods:

o At the beginning of Ijarah;
o On receipt of first rental;
o At the end of second year; and,
o At the end of Ijarah term.

Q2. Distinguish between operating Ijarah and Ijarah Muntahia Biltamleek.