hirer charges depreciation on
Answers
Answer:
(b) Under hire-purchase system the purchaser becomes the owner of the goods immediately after the down payment. ... (d) Under hire-purchase system the buyer does not charge the depreciation on the asset till he becomes the owner. (e) Interest is calculated on the hire purchase price at the given rate of interest.
Ques. Hirer charges depreciation on
A. hire purchase price
B. cash price
C. lower of the two
D. none of these
Answer:
The correct answer is B. cash price.
Explanation:
Hire purchase agreements are contracts in which the owner of commodities permits a person (the hirer) to rent things from him for a set amount of time in exchange for payment in instalments. If all of the instalments are paid on time, the hirer has the opportunity to buy the products at the end of the contract.
Because the hire-goal purchaser's is to become the owner of the item, the asset account will be debited in full. As a result, the transaction should be recorded as a "credit purchase of an asset" in the hire-books. purchaser's.
The hirer will be able to claim depreciation if the transaction is a hire-purchase or conditional sale. The financing charges included in hire payments will be taxed as income for the hire vendor and deducted as an expense for the hirer.
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