Mr.Balu purchased a machinery from Kumar & Co, on hire purchase system on 1-1-1995 . The cash price of the machine was Rs. 1,00,000 . Rs 20,000 to be paid at the time of taking delivery and balance by four instalment of Rs.20,000 plus interest @ 5% on yearly balance. Balu failed to pay the instalment due on 31-12-1996 .Kumar & Co took possession of the machinery and valued the same in their books after charging depreciation @ 10 % p.a on. Reducing Balance method .In 1997 Kumar & Co .incurred Rs. 1000 for reconditioning and re-sold the machinery for Rs.90,000. Give journal entries in the books of both the parties.
Answers
Answer:
Journal Entries in the books of Mr Balu
Date Particulars
1-1-1995 Machinery A/c Dr. 1,00,000
To Cash A/c 20,000
To Kumar & Co 80,000
31-12-1995 Kumar & Co A/c Dr. 24,000
To Cash A/c 24,000
Journal Entries in the books of Kumar & Co A/c
Date Particulars
1-1-1995 Cash A/c Dr. 20,000
Mr Balu A/c Dr. 80,000
To Machinery A/c 1,00,000
31-12-1995 Cash A/c Dr. 24,000
To Mr Balu A/c 24,000
31-12-1996 Machinery A/c Dr. 1,00,000
To Mr Balu A/c 1,00,000
31-12-1996 Depreciation on Machinery A/c Dr. 19,000
To Machinery A/c 19,000
1-1-1997 Repair of Machinery A/c Dr. 1,000
To Machinery A/c 1000
1-1-1997 Cash A/c Dr. 90,000
To Machinery A/c 90,000
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