ISTISNA' EXERCISE QUESTION 2 Asian Islamic Bank entered a three-year Istisna' contract to construct a bungalow for a total price of $1,200,000 commencing 1 January 2008. The following costs were estimated at the time of concluding the contract: 31 Dec 2008 31 Dec 2009 31 Dec 2010 Total Materials 120,000 180,000 50,000 350,000 Wages 180,000 120,000 50,000 350,000 Total 300,000 300,000 100,000 700,000 Billings were made in year 2008 for $600,000, $300,000 in year 2009 and the remaining balance was billed at the end of year 2010. Following is the payment schedule that was agreed with the client of Asian Islamic Bank: Year Total 2008 10% 2009 10% 2010 20% 2011 2012 30% 30% There was a substantial increase in material cost in 2010 due to the liquidation of a major supplier for the said material. Accordingly, the bank revised its cost estimate for material to increase by 10% higher from overall original cost. In order to anticipate the increase in cost, the customer and the bank has agreed to incorporate the increase in the selling price by the same amount. The bank recognizes profit based on the percentage of completion method. Required: 1. Prepare ledger accounts in the books of Asian Islamic Bank for all relevant transactions for the accounting periods ending; a. 31st Dec 2008 b. 31st Dec 2009 c. 31st Dec 2010 d. 31st Dec 2011, and e. 31st Dec 2012 2. Prepare the Statements of Financial Position (extract) and Income Statements (extract) for the year 2008 to 2010 to present the transactions relating to the contract