Question 3

Merchant Bank Berhad entered into an Ijarah contract with Alisya Sdn Bhd to

lease a heavy duty crane for a period of 3 years. Merchant bank purchased the crane from a local trader on 15 December 2019 for RM3,000,000 and incurred transportation cost of RM150,000. The bank also incurred legal fee of RM30,000 which is considered to be material

12. (The terms of the Ijarah contract, executed on 1 January, 2020, are as follows:)
13. (Installment of RM90,000 per month to be paid at the beginning of the month)
14. Repair costs due to technical defaults would be borne by the bank)
15. (Routine maintenance costs would be borne by the lessee.

(Additional information:)

12. The fair value of the crane at the end of the 3 years is expected to be RM200,000.)

12. (In 2020, Alisyah Sdn Bhd was charged repair cost of RM100,000 to bring thecrane to its full working order.)

12. (Lessee routine maintenance costs due to wear and tear totaled RM3,000 per year.)

12. (Residual value of the crane is RM300,000.)

Required:

Prepare relevant journal entries to record the above Ijarah contract as Ijarah

Mumtahia Bittamleek (IMBT)for fiscal year ending 31December 2020 31

December 2021 and 31 December 2022