Reference no: EM132601384

Question - Dubai Islamic Bank entered into a two-year Istisna' contract to construct a power generator for a total price of RM600,000 commencing 1 January 2007. The following costs were estimated at the time of concluding the contract.

	31 December 2007	31 December 2008
Materials	120,000	60,000
Wages	180,000	120,000
Total	300,000	180,000

Billings were made in year 2007 for $225,000 and the remaining balance was billed at the end of year 2008. Following is the payment schedule that was agreed with the client of Dubai Islamic Bank:

Year	% of total price
2007	10%
2008	10%
2009	20%
2010	30%
2011	30%

The Dubai Islamic Bank incurred general and administration expenses totaling $5,000 during 2007.

Substantial increase in material cost occurred in 2008 due to the liquidation of a major supplier for the said material. Accordingly, the bank revised its cost estimate for material to be $60,000 higher than previous planned.

The Bank recognizes revenue based on the percentage of completion method.

Required - Prepare all the necessary journal entries for the years 2007 to 2011 to record above transactions in the book of Dubai Islamic Bank.