Instration-4
On 1st January 20XI, Ashok acquired furniture on the hire purchase system from Real Aids Ltd.,
greeing to pay four semi-annual instalments of Rs.800, each commencing on 30th June 20XI. The cash
price of the furniture was Rs.3,010 and interest of 5% per annum at half yearly rest was chargeable. On
3th September 20XI, Ashok expresses his inability to continue and Real Aids seized the property. It was
greed that Ashok would pay the due proportion of the instalment up to the date of seizure and also a
furnher sum of Rs.200 towards depreciation. At the time of repossession, Real Aids valued the furniture at
Rs.1,500. The company after incurring Rs.200 towards repairs of the furniture, sold the items for
R:1,800 om 15th October 20XI. Prepare the Ledger accounts in the books of the Vendor and the
Purchaser presuming that the purchaser charges depreciation @ 10% p.a.
Answers
Answer:
In this article we will discuss about the top twenty four accounting problems on Hire Purchase, Instalments and Lease with their relevant solutions.
24 Accounting Problems on Hire Purchase, Installments and Lease
Hire Purchase, Instalments and Lease: Problem and Solution # 1.
On 1st April, 2008, Bihar Collieries obtained a machine on the hire purchase system, the total amount payable being Rs 2,50,000. Payment was to be made Rs 50,000 down and the balance in four annual instalments of Rs 50,000 each. Interest charged was at the rate of 15 per cent. At what value should the machine be capitalised?
Solution.
If amount due in the beginning of a year is Rs 100, interest for the year will be Rs 15 and the amount of instalment due at the end of the year will be Rs 115. Thus, interest is 15/115 or 3/23 of the amount due at the end of each year.
Keeping this in mind, the cash price of the machine can be calculated in the following manner:
Alternatively, the present value at 15% per annum of one rupee received annually at the end of four years is Rs 2-85498. Thus, the present value of Rs 50,000 is Rs 50,000 x 2-85498 = Rs 1,42,749. To this, we add down payment of Rs 50,000. Therefore, the cash price is Rs 1,42,749 + Rs 50,000 = Rs 1,92,749.
Hire Purchase, Instalments and Lease: Problem and Solution # 2.
G acquired a plant delivered on April 1, 2010 on the following terms:
(i) Iitial payment of Rs 40,000 immediately; and
(ii) 4 half-yearly instalments of Rs 30,000 each commencing September 30, 2010.
Interest is 10% with yearly rests. What is the cash price?
Hire Purchase, Instalments and Lease: Problem and Solution # 3.
Delhi Tourist Service Ltd. purchased from Maruti Udvog Ltd. a motor van on 1st April 2009 the cash price being Rs 1,64,000. The purchase was on hire purchase basis, Rs 50.000 being paid on the signing of the contract and, thereafter, Rs 50,000 being paid annually on 31st March, for three years, Interest was charged at 15% per annum.
Depreciation was written off at the rate of 25 per cent per annum on the reducing instalment system. Delhi Tourist Service Ltd. closes its books every year on 31st March. Prepare the necessary ledger accounts in the books of Delhi Tourist Service Ltd
Explanation:
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