Py c7 Q Murabaha

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Chapter 7

Question 1

(a) Bank Shariah provides a house financing facility based on Bai Bithaman Ajil (BBA)

principles to Aminah. The financing details are as follows:

Financing Amount RM500,000Term of Financing 10 Years (To begin on 1 st.

January 2000)Rate of Return

(Constant)4% per annum

Aminah has paid by installments as stated in the agreement for the first 5 years andagreed to settle all the payment outstanding in full at the beginning of year 6. The

Bank has agreed to give the customer a 10% rebate of the total outstanding amountdue to be paid to the Bank.

Required:

i.. Prepare an extract of the Balance Sheet and the Income Statement of BankShariah from the beginning till the end of year 5 to show the amount of netreceivable and BBA income

(5 Marks)

ii. Prepare all relevant journal entries to record the recognition of assets and incomefor the first, fifth and sixth year only in the book of Ba nk Shariah (including thetreatment on rebate).

(13 Marks)

(b) Why do you think among the objectives of accounting for Islamic financialinstitutions as stipulated by AAOIFI are to determine rights and obligations ofinterested parties, and to safeguard entity assets and rights of others? Use examplein part (a) above to support your answer.

(7 Marks)(Total: 25 Marks)

(Q2 Final exam sem 1 2008/2009)

Question 2Bank Islam provided a Murabaha financing facility amounting to RM 100,000 to BinaConstruction to purchase equipment on 1st January 2011. The mark-up was agreed at10% per year on the initial sale price of the equipment. The Murabaha installments wereto be paid in equal installments annually at the end of the year over the next 5 years. Itwas agreed that a late penalty payment of 5% of the installments receivable was to be


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charged to Bina Construction if they fail to pay on time. The Sharia Supervisory Boardof the bank has decided that the penalty should be treated as part of the banks income.The following events took place in the following four years to 31st December 2014.

Jan 1, 2011:The Murabaha contract was signed and the bank purchased the equipment forRM 100,000 which was delivered directly to the clients construction site. The bank paidfor the equipment in cash.

Dec 31, 2011:The client paid the bank the installment as scheduled.

Dec 31, 2012:The client could not pay on time but subsequently paid the installment and the penaltyon March 31, 2013.

Dec 31, 2013:The client paid the bank the installment as scheduled.

Jan 1, 2014:Bina Construction decided to pay off the amount in full and requested the bank for arebate. The bank decided to give a 7.5% rebate on the outstanding balance in theMurabaha account. On the same day, Bina Construction settled all payments.

Required:

i.

Journal entries for Jan 1, 2011.ii. Journal entries for Dec 31, 2011.iii. Journal entries for Dec 31, 2012.iv. Journal entries for March 31, 2013.v. Journal entries for Jan 1, 2014.vi. Extract of the Income Statement for year ending 2011, 2012, 2013 and 2014.vii. Extract of the Balance Sheet as at 31 December 2011, 2012, 2013 and 2014.

[Total: 20 marks](Q2 Mid term sem 1 2011/2012)

Question 3

Bank Shariah Islami provides a house financing facility based on Bai Bithaman Ajil(BBA) to Asiah. The financing details are as follows:


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Financing Amount RM500,000Term of Financing 10 Years (To begin on 1 st.

January 2005)Rate of Return

(Constant)4% per annum

Asiah paid by installments for the first 5 years and agreed to settle all the paymentoutstanding in full at the beginning of year 6. The Bank has agreed to give thecustomer a 10% rebate of the total outstanding amount due to be paid to the Bank.

Required:

i.. An extract of the Balance Sheet and the Income Statement of Bank Shariah Islamifrom the beginning till the end of year 5 to show the amount of net receivableand BBA income

(5 Marks)

ii. Prepare all relevant journal entries to record the recognition of assets and income

for the first, fifth and sixth year only in the books of Bank Shariah Islami. (10 Marks)

(Q2 Mid term sem 1 2010/2011)

Question 4

PLA Company is a contracting firm based in Malaysia. The company approachedKuwait Finance House (M) for the funding of an order of 5 trucks to be imported from Japan for use in Malaysia. The bank agreed to finance the transaction on Murabaha basis

at a Murabaha margin of 5% per annum. The customer is obliged by his promise wouldpay the bank 10% of the purchase price of the trucks as Hamish Jiddiyyah on the day ofthe order. The customer also agreed to settle Murabaha debts over a five years period onequal quarterly installments. It was agreed that penalty of 1% of the receivable amountwill be charged for the late payment and the penalty will be charged to the charity. Thebank fully paid the purchase price of the shipment on 5 January 2006. The following arethe details of the transaction:-


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Shipment related costs Date Amount (RM)

Purchase price 5 January 2006 950,000Shipping andInsurance

20 January 2006 50,000

Port handlingexpenses

25 March 2006 20,000

Murabaha Transaction Murabaha signaturedate

1 April 2006

Hamish Jiddiyyah 4 January 2006Discount (unexpectedreceived 1 May 2006) 20% of purchase price

InstallmentsGrace period 3 monthsNumber ofinstallments

20

First installment date 1 July 2006Second installment 1 October 2006 Customer only paid on 31

December 2006Third installment 31 December 2006

Note : Ignore any foreign exchange effects on this transaction.

Required:

a. Prepare the necessary JOURNAL ENTRIES for this transaction in the books ofthe bank at the commencement of the transaction, delivery of the shipment andpayment of the first 3 installments.

[9 marks]

b. Draft a set of financial statements for the year ended 31 December 2006 (IncomeStatement and Balance Sheet) showing the effect of the transaction.

[4 marks]

c. What will happen to the Murabaha financing amount if the amount paid by thecustomer on 4 January 2006 is Urboun and the customer concludes the sale?

[2 marks]


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b. Show the extract of the balance sheet and income statements of Bahrain

Muamalat Bank in respect of the above transactions at the end of the first 2 yearsand on 1 July 2007, showing clearly the amount owing by Taqwa PLC after therebate.

(4 marks)

c. What will be the journal entries if Taqwa PLC is not able to pay one of theinstalments, and the Shariah Advisory Board agreed to charge penalty and thepenalty given to the charity?

(3 marks)

(Total: 25 marks)(Q2 Mid term sem 2 2007/2008)

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Py c7 Q Murabaha