Musyarakah contract illustrations
On January 1, 2005 A and B agreed to do Musyarakah contract. A contributed a land and building that have fair value of Rp 500 and Rp 1.000. On the book of A, those assets have carrying value of Rp 200 and Rp 800, respectively. B contributed cash of Rp 800 and Merchandise Inventory with fair value of Rp 700. On the book of B, the inventory has book value of Rp 600. They agreed that A would manage the business. Nisbah was decided by 50%:50%. The duration of the contract was 5 years. B will receive the contribution back during the period, starting from the end of first year in a same amount.
Year 1
A reported net income of Rp300. Although A has paid one fifth of B contribution but, he did not pay the profit sharing this year.
Year 2
A paid last year sharing to B. A reported net loss of Rp200. This loss is a normal loss (unintentionally mistake). A paid one fifth of B’s contribution.
Year 3
A paid last year sharing to B. A reported Net Income of Rp 300, including extraordinary loss (intentionally mistake by A) of Rp 100. A paid one fifth of B’s contribution.
Year 4
A paid last year sharing to B. A reported Net Income of Rp 400. A paid one fifth of B’s contribution.
Year 5
A paid last year sharing to B. A reported Net Income of Rp 350 ( it was paid right after the contract finished) A paid one fifth of B’s contribution.
The musyarakah asset left were Land and Building. The cash left was Rp1. 000.
