Ithmaar bank has entered into an ijarah contract with Amal Company to lease an equipment for a period of 3 years. The Bank purchased a specialized equipment from a local trader on the 1st of January 2018 for BD 1,500,000 and incurred transportation cost of BD 50,000. The Bank also incurred legal fee of BD 15,000 relating to the ijarah contract, which the bank considered to be material. Both parties have agreed that the installments should be paid every quarter. The rental payment was agreed BD 60,000 per month. The fair value of the equipment in 3 years time is expected to be BD 100,000 based on the estimate of certified value.

At the beginning of the year 2018, Amal Company incurred repair cost of BD 50,000 to enable the equipment to be used property. In the same year Amal Company also found technical default in the equipment and incurred BD 30,000 to repair the equipment necessary to retain its full working order. Every year, Amal Company incurred routine maintenance costs due to wear and tear amounting BD 1,500 per year.

Required:

Prepare the necessary journal entries to record the above ijarah contract as pre-described by AAOIFI FAS No.8 for the following periods: - At the beginning of ijarah

- On receipt of first rental

- At the end of first year

- At the end of second year

- At the end of ijarah term

Determine the profit on ijarah financing from year 1 to year 3