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    AFA Hire Purchase

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    yashikabafna1

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    © All Rights Reserved
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    of 47
    Note : Please see all Problems of this Chapter in page nos. P-II/III/1-48 to 1-57 in Text Book Practical Problems of Same Chapter. SOLUTION OF PROBLEM 1 = In the Books of Cholan Firm MACHINERY ACCOUNT Year z 1 | To Pandiyan Firm Afe 60,000 PANDIVAN FIRM ACCOUNT Year Year z 1 | ToCash Ale 1 |ByMachinery Alc 60,000 To Balance o/d By Interest Alc 3,000 63,000 | ToCash Alc I | By Balance b/d 40,000 To Balance cfd By Interest 2,000 42,000 WM | To Cash A‘ Ml By Balance bid 20,000 ° By Interest 1,000 21,000 SOLUTION OF PROBLEM 2 in the Books of Buyer HIRE VENDOR ACCOUNT z 414 | To Cas 4-4-14 | By Machinery Alc 34,860 sh (D i) : 4345] To cash (ret ineetenon) 31-3-16 | By Interest 2,486 To Balance cid 37,346 —_ NeAN/4-2 HIRE PURCHASE AND INSTALMENT PURCHASE SYSTeys 31-3-16] To Cash Alc 1-4-15 | By Balance b/d (2nd Instalment) 10,000 | 31-3-16 | By Interest A/c = To Balance c/d 9,081 19,081 31-3-18] To Cash Alc | 1-4-17 | By Balance b/d (8rd Instalment) 10,000 | 31-3-18 | By Interest Alc (Bal. Fig.) 10,000 _—— SOLUTION OF PROBLEM 3 Working Notes : (1)_ Calculation of principal and interest included in each instalment : Cash | Interest Instalments Price Payment | interest towards cash price z z z z Cash Price 37,250 5% Less : Paid on 1-1-2014 10,000 : 10,000 = 27,250 Less : Paid on 31-12-2014 8,637 8,637 | 1,363 18,613 Less : Paid on 31-12-2015 9,069 9,069 931 9,544 Less : Paid on 31-12-2016 9,544 9,544 37,250 (2) Calculation of Depreciation : Cash Price on 1-1-2014 Less : Dep. @ 10% for 2014 Balance on 1-1-2015 Less : Dep. @ 10% for 2015 Balance on 1-1-2016 Less : Dep. @ 10%'for 2016 Balance on 1-1-2017 In the Books of Chennai Company JOURNAL ENTRIES 2014 2015 2016 Dr. Cr. Dr. Cr. Dr. Cr. z zt] oe z z z Jan. 1 | Machinery Dr. | 37,250 - - To Mumbai Co. 37,250 - - (Purchase of Machinery on H.P.) Mumbai Co. A/c Dr. | 10,000 a _ To Bank 10,000 - _ (Cash down payment) IRE PURCHASE AND INSTALMENT PURCHasE SYSTEMS ee ARCHASE SYSTEMS MHS 1 | Interest A/c 020-9 To Mumbai Co. Dr. | 1.968 931 456 (Interest credited to vendor) 1,363 931 456 Mumbai Co. A/c al To Bank Pr. | 10,000 10,000 10,000 (Payment of Instalment) 10,000 10,000 10,000 Depreciation A/c pp A To Machinery Alc ad a7es| 2353 9017 | ait (Depreciation charged to machinery) " 3,353 a Profit & Loss A/c Dr.) 5,088 4,284 3,473 To Interest A/c 1,388 ra ea To Depreciation A/c 3.725 3,353 3,017 (Being interest and depreciation " . . transferred to Profit & Loss A/c) MACHINERY ACCOUNT 2014 | z] 2014 z Jan. 1] To Mumbai Co. 37,250 | Dec. 31 | By Depreciation A/c 3,725 Dec. 31 |" Balance cid 33,525 37,250 2015 2015 Jan.1}To Balance bid 33,525 | Dec. 31 | By Depreciation A/c 3,353 Dec. 31 |" Balance c/d 30,172 33,525 2016 2016 Jan.1|To Balance bid 30,172] Dec.31 | By Depreciation A/c 3,017 Dec. 31 |" Balance c/d 27,155 30,172 2017 . Jan. 1 ]To Balance bid 27,185 MUMBAI CO's ACCOUNT 2014 z] 2014 z van.1|To Bank 10,000] Jan. 1 | By Machinery A/c 37,250 Dec. 31 }To Bank 10,000 Dec. 31 | By Interest 1,363 Dec.31|" Balance cid 18,613 38,613 38,613 2015 2015 Dec. 31|To Bank 10,000) Jan. 1 | By Balance b/d 18,613 Dec.31]" Balance cid 9,544] Dec. 31 }" Interest 931 19,544 19,544 ae a By Balance bid 9,544 Dee. 3 10,000] Jan. 1 | By Balance :! neat Dec. 31 |” Interest 456 10,000 10,000 ~~ NeANA-4 : HIRE PURCHASE AND INSTALMENT PURCHASE SYsTey. OOOO oereoonmaeeeesoorvervv ween INTEREST ACCOUNT 2014 z 2014 z Dec. 31 ]To Mumbai Co's A/c 1,363 | Dec. 31 | By Profit & Loss A/c |_1.363 ens 6.81 |By Prof & Loss Al ; . 31 | By Profi oc Dec. 31 | To Mumbai Co's A/c 931 | Dec, y |__ 01 2016 pore Profit & Loss A/c Dec. 31] To Mumbai Co's A/c 456| Dec. 31 | By —*58 DEPRECIATION ACCOUNT _ 2014 ze] 2014 . z > Dec. 31} To Machinery A/c 3,725 | Dec. 31 | By Profit & Loss A/c 3,725 —s 2015 2015 Dec. 31" Machinery A/c 3,353 | Dec. 31 |" Profit & Loss A/c |_ 3.353 2016 2016 Dec. 31]" Machinery A/c 3,017] Dec.31|” Profit & Loss A/c 3,017 IN THE BOOKS OF MUMBAI COMPANY JOURNAL ENTRIES T 2014 2015 [ 2016 Dr. Cr. Dr.| Cr. Dr. Cr. z z z z z z Jan. 1 | Chennai Co. A/c Dr. |37,250 - - To Hire Sale A/c 37,250 = - (Machinery sold on HP.) Cash A/c Dr. |10,000 a - To Chennai Co. A/c 10,000 - - (Cash received on down payment) Dec. 31) Chennai Co. A/c Dr. | 1,363 931 456 To Interest A/c 1,363 931 456 (Interest charged to Chennai Co.) Bank A/c Dr. | 10,000 110,000 10,000 To Chennai Co. A/c 10,000 10,000 10,000 (Instalment received) Interest A/c Dr.} 1,363 931 456 To Profit & Loss A/c 1,363 931 456 (For interest transferred to Profit & Loss Alc) Hire Sale A/c Dr. 137,250 - = To Trading A/c 37,250 - 7 (For hire sale transferred to Trading A/c) CHENNAI CO's ACCOUNT 2014 z 2014 z Jan.1|To Hire Sale Alc 37,250] Jan. 31 | By Bank 40,000 Dec. 31” Interest A/c 1,363 | Dec. 31 |" Bank 10,000 Dec. 31 |" Balance old 18,613 we pURCHASE AND INSTALMENT PURCHASE SYSTEMS!” weW/A-5 2015 yan. 1 ]T0 Sra Dec. 31 | By Bank 40,000 pec. 31 Dec, 31 |" Balance cid | 9,544 ee 2016 jan.1 | To Balance b/d 9,544] Dec. 31 | By Bank 10,000 » Interest A/c pec. 31 2014 pec. 31 Jan. 1 | By Chennai Co. INTEREST ACCOUNT z 2014 z To Trading A/c 2014 Dec. 31 | To Profit & Loss A/c 1,363 | Dec. 31 | By Chennai Co. 1,363 2015 2015 Dec. 31 | To Profit & Loss A/c 931| Dec.31}” Chennai Co. 931 po 2016 2016 Dec. 31 |To Profit & Loss A/c 456] Dec.31 |" Chennai Co. 456 (b) BALANCE SHEET as on 31st Dec. 2015 Assets z z Machinery 33,525 Less : Depreciation 3,353 30,172 Less: Due to MumbaiCo. 9,544 20,628 SOLUTION OF PROBLEM 4. Cash price = = 26,350 Hire purchase price = Down payment = 10,000 48,000 | * 28,000 3 instalments (3 x = 6,000) Interest = 7 28,000 - < 26,350 == 1,650 Interest for the 1st year (2014) % 26,350 -& 10,000 = ¥ 16,350 x 3 = 7817.50 Instalment =< 6,000 — 817.50 = 51 82.50 (cash price) Interest for the 2nd year (2015) % 16,350 - = 5,182.50 = 11,167.50 x ioe % 558.38 Instalment = % 6,000 - 558.38 = % 5,441.62 (cash price (cP) Interest for the 3rd year (2016) 3 14,16750-75,441.62= & 5,725.88 C.P % 6,000.00 instalment % 274.12 Interest Total interest = € 817.50 + 558.38 + 274.12 = © 1,650. H-1/4-6 HIRE PURCHASE AND INSTALMENT PURCHASE SYSTEMS Ledger Accounts in the Books of Ws Tirupathi Industries (Hire Buyer) Or. MACHINERY ACCOUNT Cr, z , = 1-1-2014 |To M/s Hyderabad I31-12-2014| By Depreciation Alc 3,952.59 Machine Make Co. 26,350 |31-12-2014] By Balance c/d 2,397.50 26,350 1-1-2015 |To Balance bid 22,397.50|31-12-2015] By Depreciation 350.65 31-12-2015] By Balance c/d 119,037.87 22,397.50 22,397.50 1-1-2016 |To Balance b/d 19,037.87|31-12-2016| By Depreciation 2,855.68 31-12-2016] By Balance c/d H16,182.19 19,037.87 119,037.87 1-1-2017 | To Balance bid 16,182.19 Dr. Ms HYDERABAD MACHINE MAKING COMPANY ACCOUNT o T= z 1-1-14 | To Bank A/c 10,000 | 1-1-2014] By Machinery A/c 26,350 31-12-14 | To Bank Alc 6,000 31-12-2014 | By Interest 817.50 31-12-14 | To Balance cid 11,167.50} 27,167.50 27,167.50 31-12-15 | To Bank 6,000 | 1-1-2015] By Balance b/d 11,167.50 31-12-15 | To Balance cid 5,725.88}31-12-2015 | By Interest 558.38 11,725.88| 11,725.88 31-12-16 | To Bank 6,000 | 1-1-2016] By Balance b/d 5,725.88 [31-12-2016 | By Interest 274.12 6,000. SOLUTION OF PROBLEM 5 In the Books of Mr. Gupta MACHINERY ACCOUNT Year =| Year z 1 [To Mr. Pankaj 15,500] 1 — | By Depreciation 1,550 Balance cid 13,950 15,500 15,500 Il | To Balance b/d 13,950/ il | By Depreciation 1,395 Balance old 12,85 13,950 13,950 I | To Balance b/d 12,555] ll | By Depreciation 1,256 "Balance o/d 11,299 12,555 |_12,555 ¥ an pURGHASE AND INSTALMENT PURCHASE SYSTEMS Wet/A-7, a MR. PANKAJ ACCOUNT r year | to Bank aan Year z ' Je Bank Eon | | By Machinery A/c 15,500 "Balance c/d 8.750 Interest A/c 1,250 16,750 Il To Bank " me Bic » Balance c/d yy Balance b/d 8,750 ” Interest A/c 833 To Bank = mm {T° Bar I | By Balance bid 4,583 "Interest Alc 47 5,000 IN ACCOUNT Year . =] Year | [To Machinery A/c 1,550] | | By Profit & Loss A/c [To Machinery Il | By Profit & Loss A/c i |" Machinery Alc | 1,256] Il |" Profit & Loss A/c INTEREST ACCOUNT Year - z] Year | |To Mr. Pankaj Alc 4,250] 1 — | By Profit & Loss A/c [To Mr. Pankaj A/c 833} Il‘ By Profit & Loss A/c |" Mr. Pankaj A/c 417} ll |” Profit & Loss A/c In the Books of Mr. Pankaj MR. GUPTA'S ACCOUNT Year =| Year 1 |To Hire Sale 45,500] | |By Bank "Interest A/c 4,250 ”” Bank » Balance cld 16,750 Il | To Balance b/d 8,750| i | By Bank * Interest A/c 833 "Balance cld 9,583 Ill |To Balance b/d 4,583 i | By Bank "Interest A/c AI7 | _ 8,000. INTEREST ACCOUNT Year z] Year | |To Profit & Loss Alc |_1.250] 1 |8y Me Gupta Ac Wl |* Profit & Loss Ale |__933} "Mr Gupta Alo . Ni I |* profit & Loss Ale | ai7] il Mr. Gupta Ae | Pree toss ™ we HIRE PURGHASE AND INSTALMENT PURCHASE S¥srey, Working Note : Calculation of interest : ? Total amount paid (3,000 + 6,000 + 6,000 + 5,000) 18,009 Less : Cash Price 18,509 Total Interest — 2805 2.509 ‘ed in the ratio of outstanding amount at the end of ach Yoarig= Total interest & 2,500, i interest € 2,500, is apportion twill come to € 1,250, € 833 and? 417, % 15,000, F 10,000 and & 5,000 or 3 : SOLUTION OF PROBLEM 6 Reale 5 In the given problem rate of interest is not given. Hence it should be calculated as follows : Cash price (C.P.) = T 1,60,000. Hire purchase price (H.P.) = % 40,000 + (3 x 50,000) = 1,90,000. ~: Interest = H.P. -C.P. 1,90,000 — % 1,60,000 = 30,000. Interest Years 1 : 2: 38 . Outstanding amount ratio 3 z 2 : 16 (total ratio) Interest for Istyear = % 30,000 x 3/6 = % 15,000 2nd year = % 30,000 x 26 = 7 10,000 3rd year =% 30,000 x 1/6 = & 5,000 = 30,000 LEDGER ACCOUNTS IN THE BOOKS OF PURCHASER MINI BUS ACCOUNT Dr. Cr. z z 1-1-2014 | To Hire Vendor 1,60,000 |31-12-2014) By Depreciation 16,000 31-12-2014] By Balance c/d 1,44,000 1,60,000 1,60,000 1-1-2015 | To Balance bid 1,44,000 [31-12-2015] By Depreciation [31-12-2015] By Balance c/d 1,44,000 1-1-2016 | To Balance b/d 1,29,600 |31-12-2016] By Depreciation |31-12-2016] By Balance c/d 1,29,600 1-1-2017 | To Balance b/d 1,16,640 |31-12-2017| By Depreciation |31-12-2017| By Balance c/d 1,16,640 1-1-2018 | To Balance b/d 1,04,976 HIRE VENDOR ACCOUNT Cr. Dr. - Toms 1-1-2014 | To Bank 40,000 | 1-1-2014] By Mini Bus A/c 1,60,000 ae -HASE AND INSTALMENT PURCHASE SYSTEMS pe PURE a oT te Oe old 50,000 81-12-2014] By Interest 15,000 207 — 4,75,000 | 4.75,000 Bank 1-1-201 id 85,000 2.2015} TO '5| By Balance bic ee 422015 | To Balance old 1-12-2015] By Interest | _ 10,000 95,000 Bank 1-1-2016] By Balance b/d 48,000 12-2016 | To y Balance 3t 1-12-2016] By Interest 5,000 50,000 ION OF PROBLEM 7 Cash Price = * 25,000 Down Payment = € 5,000 Interest tstyear (31-12-2013) & 25,000 - & 5,000 = € 200096 =% 1,000 = 750 ‘2nd year (31-12-2014) = 20,000 — % 5,000 = % 15,000 x ‘a 3rd year (31-12-2015) & 15,000 — & 5,000 = & 10,000 x io =% 500 sth year (81-12-2016) € 10,000 - € 5,000 = € 5,000 +5, 250 Total Interest % 2,500 LEDGER ACCOUNTS IN THE BOOKS OF MR. A (BUYER) MACHINE ACCOUNT br cr. z 142014 |To B 1-12-2014] By Depreciation 2,500 1-12-2014] By Balance cid 22,500 25,000 14-2015 |To Balance b/d 22,500 |31-12-2015] By Depreciation 2,250 1-12-2015] By Balance oid 20,250 22,500 11-2016 To Balance bid 1-12-2016] By Depreciation 1-12-2016] By Balance old 20,250 14-2017 To Balance bid 18,225 {31-12-2017| By Depreciation 1,823 1-12-2017| By Balance cd 16,402 18,225 18,225 Balance bid 16,402 — IT PURCI WHI4-410 HIRE PURCHASE AND INSTALMEN’ HASE SYSTEy B's ACCOUNT Dr. Cr. ee 14 Machinery Alc s 1-1-2014 | To Bank +5000 1-1-2014 | By (Cash me) 25,000 (Down payment) nf t 31-12-2014] To Bank 31-12-2014 | By Interes! 1,000 (© 5,000 + 1,000) 31-12-2014] To Balance cid a 26,000 0 AM Balance bid 45, 31-12-2015 | To Bank 1-1-2015 | By 000 (F 5,000 + ¥ 750) 5,750 | 31-12-2015 | By Interest 750 * | To Balance c/d __ 10,000 | 15,750 |_15750 31-12-2016 | To Bank 1-1-2016 | By Balance bid 10,000 (5,000 + % 500) 31-12-2016 | By Interest 500 "| To Balance cid {| 10,500 31-12-2017 | To Bank 1-1-2017 | By Balance bid 5,000 (@ 5,000 + % 250) 5,250 | 31-12-2017 | By Interest | 250 5,250 |__5.250 IN THE BOOKS OF B (VENDOR) A'S ACCOUNT Dr. Cr. z z 1-1-2014] To Sales A/c 25,000] 1-1-2014] By Bank 5,000 (Cash price) (Down payment) 31-12-2014] To Interest 1,000 | 31-12-2014 | By Bank (% 5,000 + 1,000) 6,000 | By Balance cid 15,000 26,000 1-1-2015 | To Balance b/d 15,000 | 31-12-2015 | By Bank 31-12-2015] To Interest 750 (% 5,000 + = 750) 5,750 31-12-2015 | By Balance c/d 10,000 1-1-2016 | To Balance b/d 10,000 } 31-12-2016 | By Bank 31-12-2016] To interest 500 (© 5,000 + % 500) 5,600 an . By Balance c/d 5,000 10,500 10,500 1-1-2017 | To Balance bid 5,000 | 31-12-2017 | By Bank 31-12-2017] To Interest 250 (© 5,000 +z 250) 5,250 5,250 $d > HIRE PURCHASE AND INSTALMENT PURCHASE SYSTEMS 4-14 SOLUTION OF PROBLEM 8 In the Books of X & Co. WAGON ACCOUNT 2015 ; z] 2016 co July1 ]To Hire Vendor 4,600 | June 30 | By Depreciation A/c 460 | "Balance c/d 4,140 4,600 2016 2017 July1 |To Balance bid 4,140 | June 30 | By Depreciation A/c 414 "Balance c/d 3,726 4,140 4,140 HIRE VENDOR ACCOUNT 2015 z| 2015 = July? |To Bank 1,400} July1 | By Wagon A/c 4,600 Dec.31|” Bank (800 + 80) 880| Dec.31 |” Interest Alc 80 2016 (on % 3,200 @ June 30)” — Bank (800 + 60) 860} 2016 5% for six months) " * Balance c/d 1,600 | June 30 |” Interest Alc 60 4,740 2016 2016 Dec. 31 |To Bank July1 | By Balance b/d 1,600 2017 (800 + 40) 840] Dec.31 |” Interest A/c 40 June 30}” Bank (800 + 20) 820} 2017 June 30 |” Interest A/c 1,660 SOLUTION OF PROBLEM 9 Working Note : Calculation of Cash Price = Instalment x Ref. to Annuity Table + Down Payment = % 10,000 x 2.7282 + € 10,000 = % 27,232 + 10,000 = % 37,232 In the Books of Kohli Co. MACHINERY ACCOUNT 2015 Z] 2015 z Jan.1 | To Hire Vendor A/c 37,232 | Dec. 31 | By Depreciation A/c 7,446 " 31 |" Balance c/d 29,786 37,232 37,232 2016 2016 Jan.1 |” Balance bid 29,786 | Dec. 31 |” Depreciation A/c 5,957 "31 |" Balance c/d 23,829 29,786 29,786 — [ENT PURCHASE SYSTEMS U-1/1-12 HIRE PURCHASE AND. INSTALME 2017 Depreciation A/c 4,766 Jan. 1 | To Balance bid BY oarance cid 19,063 HIRE VENDOR ACCOUNT 2015 By Machinery A/c at a To pak 40,000 ” Interest ee a 1,362 7 "Bani , (5% on & 27, s 18,594 & Dec. 31 Balance cid |_ 18,604 38504 2016 bid 18,594 By Balance , 31] To Bank 10,000 " ee 31 Fi Balance old 9,524 Interest A/c 930 19,524 19.524 2017 By Balance b/d 9,524 Deo. $1 | To Bank ed » Interest Ale 476 10,000 SOLUTION OF PROBLEM 10 Let the cash price is ‘P’ and interest () The first instalment P +3/ = 43,500 ~(l) Second instalment P+2i =39,000 Third instalmentP +i = 34,500 Adding (2) and (3) 2P +3/ = 73,500 Deducting (1) from (4) P= % 30,000 “. Cash Price paid in each instalment is = 30,000 Interest in each instalment is as follows : No. of Instalment Cash price Interest instalment paid paid paid z z z 1 43,500 30,000 13,500 2 39,000 30,000 9,000 3 34,500 30,000 4,500 «. Cash Price 90,000 Add : Cash Down Paid _ 40,000 + Required Cash Price 1,30,000 IN THE BOOKS OF HAZARIKA LTD, BORA BROTHERS ACCOUNT z z 1-4-2014 | To Bank Alc 40,000 | 1-4-2014 | By Machinery Alc 1,30,000 31-3-2015] To Bank A/c 43,500 |31-3-2015 By Interest A/c 13,500 ” | To Balance c/d 60,000 1,43,500 | 7,43,500 ee IRE PURCHASE AND INSTALMENT PURCHASE SYSTEMS HAn/4-43. 1-3 -2016 Ms Bane oa 39,000 | 1-4-2015 | By Balance bid 60,000 ‘0 Balance 30,000 |31-3-2016 | By Interest Alc 9,000 69,000 69,000 1-3-2017] To Bank A/c 34,500 | 1-4-2016 | By Balance bid 30,000 131-3-2017 | By Interest A/c 4,500 34,500 34,500 |_34.600 _ BALANCE SHEET OF M/s HAZARIKA LTD. as at 31st March, 2016 Liabilities “Assets z z Machinery (at cost) 4,30,000 Less : Due to Hire Vendor _30,000 SOLUTION OF PROBLEM 11 In the Books of X Limited MOTOR CAR ACCOUNT 2014 Te] 2014 Jan.1|To Y Ltd. (see note) 60,000 Dec. 31 | By Depreciation Dec. 31 |” Balance c/d 2015 2015 Jan. 1 |To Balance bid Dec. 31 |By Depreciation Dec. 31 | By Balance cid 2016 2016 Jan.1|To Balance b/d 38,400 | Dec. 31 | By Depreciation 7,680 Dec.31 |” Bank 30,000 Dec. 31 Profit & Loss A/c 720 (Loss on sale) YLTD.’S ACCOUNT 2014 z 2014 Jan. 4 | To Bank 12,000] Jan. 1|By Motor Car 60,000 Dec. 31 |" Bank (& 16,000 += 4,800) 20,800 | Dec. 31]” Interest Dec. 31 |" Balance c/d 32,000 (10% on & 48,000) 4,800 [4.800 2015 2015 Dec. 31 | To Bank (= 16,000 + = 3,200) 19,200] Jan. 1 | By Balance b/d 32,000 Dec. 31 |” Balance c/d 16,000 | Dec. 31}" Interest 3,200 35,200 35,200 2016 2016 f Dec. 31 | To Bank Jan. 1 |By Balance b/d 16,000 (€ 16,000 +@ 1,600) 17,600 | Dec. 31 |” Interest 1,600 17,600 SS 444 HIRE PURCHASE AND INSTALMENT PURCHASE SYSTEM Unm414 HIRE PURCHASE AND INSTALMENT PURCHASE SYSTEMS. Working Note : Calculation of Cash Price : Cash Price of 3rd instalment ‘ Le. 109 x 17,600 16.000 Total Cash Price Down Payment + (% 16,000 x 3) % 12,000 + € 48,000 = & 60,000. SOLUTION OF PROBLEM 12 DOBSONS LTD. MACHINERY ACCOUNT 2015 ze] 2015 - z Jan. 1] To Hind Machinery Ltd. Dec. 31 | By Depreciation 9,255 (see note) 61,700] Dec.31 |” Balance cld |_ 52.445, 61,700 |_61,700 2016 2016 | Jan.1|To Balance b/d 52,445 | Dec. 31 |" Depreciation 7,867 Dec. 31 |" Balance c/d 44,578 52,445 52,445 2017 2017 _ Jan.1|To Balance b/d 44,578 | Dec. 31 |" Depreciation 6,687 Dec. 31 |” Balance c/d 37,891 2018 2018 Jan.1]To Balance b/d 37,891 | Dec.31 |” Depreciation 5,684 Dec. 31 |” Balance cld 32,207 37,891 2013 2013 Jan.1|To Balance b/d 32,207 | Dec.31 |” Depreciation Dec. 31 |” Balance c/d 2014 Jan.1|To Balance b/d 27,376 HIND MACHINERY LTD.’S ACCOUNT 2015 z] 2015 z Jan.1]To Bank 20,000] Jan. 1 | By Machinery A/c 61,700 Dec. 31|To Balance c/d Dec. 31 | By Interest Alc 4,168 |_ 65.868 2016 2016 ; Jan.1|To Bank van. 1 | By Balance bid 45,868 Dec.31]" Balance cd Dec. 31 |” Interest A/c | _3,487, | _49,355 2017 2017 — Jan.1]To Bank Jan.1 | By Balance bid 38,955 Dec. 31|” Balance cid Dec. 31 |" Interest A/c | 2,736, [#1081 yi pIRE PURCHASE AND INSTALMENT PURCHASE SYSTEMS MAMA -15 2018 2018 Jan.1|To Bank 11,000] Jan. 1 | By Balance b/d 30,091 Dec.31|” Balance cid 21,000 | Dec. 31 |" Interest A/c | __ 1,909 32,000 2013 2013 Jan.1]To Bank 11,000] Jan. 1 | By Balance b/d 21,000 Dec. 31|" Balance c/d 11,000 | Dec. 31 |" Interest A/c 1,000 22,000 2014 2014 Jan.1]To Bank 11,000] Jan. 1 | By Balance b/d 11,000 Working Note : Calculation of Interest and Outstanding Balance : No. of Closing Amount of Total Interest Opening Instalment Balance Instalment @ 10/110) | Balance z z z z z 5 al 11,000 11,000 1,000 10,000 4 10,000 11,000 21,000 1,909 19,091 3 19,091 11,000 30,091 2,736 27,355 2 27,355 11,000 38,355 3,487 34,868 1 34,868 11,000 45,868 4,168 ° | 41,700 Cash Price = € 41,700 + 20,000 (Down payment) == 61,700. SOLUTION OF PROBLEM 13 IN THE BOOKS OF COCONUT GROWERS MACHINERY ACCOUNT Year z Year ! To Y Machinery Co. Ltd. 41,189 | By Depreciation ” Balance cid 41,189 tl To Balance b/d 32,951 i ” Depreciation "Balance cid 32,951 MM To Balance b/d 26,361 Ml By Depreciation "Balance c/d 26,361 V |To Balance b/d 21,089 IV _ | By Depreciation "Balance cid 21,089 Vv To Balance b/d 16,871 v By Depreciation 3,374 "Balance c/d 13,497 16,871 * ‘Actual Interest for the first year comes to Rs. 4,170 but it has been put at Rs. 4,168 for balancing purpose. a, AHURA HIRE PURCHASE AND INSTALMENT PURCHASE SYSTEMg VI |To Balance b/d 13,497| vi |By Bank 18,000 "Profit & Loss Alc (Profit on Sale) 1,503 15,000 L_18.000 Y MACHINERY CO. ACCOUNT _ Year Tro % | Year - z 12,000 | |_| By Machinery A/c 41,189 1 [Te Bane Ae By Interest Alc 2919 "Balance old |To Bank Ale I | By Balance b/d "Balance c/d "Interest A/c tn |To Bank Ale i | By Balance b/d "Balance ofd "Interest Alc 21,064 WV [To Bank Ale 7,700 | IV | By Balance b/d To. Balance old 7,000 * |" Interest Alc 14,700 Vv [To Bank Ale 7,700 | V__ | By Balance bid "Interest Alc 00 Working Note : Calculation of Cash Price : ‘Amount due No.of | after payment | Amount of Total | interest (10/110) | Opening Balance Instalment _| ofinstalment | instalment | amount due z z z z z v = 7,700 7,700 700 7,000 Vv 7,000 7,700 | 14,700 1,336 13,364 i 13,364 7700 | 21,064 1,915 19,149 " 19,149 7700 | 26,849 2.481 24,408 | 24,408 7700 | 32108 2919 29,189 ++ Cash Price = ® 29,189 + 12,000 (Down Payment) = % 41,189, SOLUTION OF PROBLEM 14 In the Books of Eastern Printers MACHINE ACCOUNT 2015 z] _ 2018 z July 1 ]To Hire Vendor Alc 30,000 Dec. 31 | By Depreciation Alc ee (see note) Dec. 31 |" Balance old 28,500 30,000 > 2016 Jan. 1]To Balance bid 2017 Jan, 1|To Balance b/d iné PURGHASE AND INSTALMENT PURCHASE SYSTEMS W447 2016 28,500 | Dec. 31 | By Depreciation A/c 2,850 Dec. 31 |" Balance old 25,650 28,500 28,500 25,650 >= HIRE VENDOR ACCOUNT 2015 July 1 Dec. 31 Dec. 31 To Bank * Bank "Balance c/d 2016 June 30 Dec. 31 By Machinery A/c * Interest A/c By Balance b/d Interest A/c "Interest A/c Working Note : Calculation of Cash Price & Interest : No. of Closing ‘Amountof | Total Interest ‘Opening instalment Balance | _ instalment @s5105 | Balance z z z z z 3 = 6,300 6,300 300 6,000 2 6,000 7,440 13,440 640 12,800 1 12,800 8,200 21,000 4,000 20,000 | Cash Price = Down Payment + € 20,000 = & 10,000 + & 20,000 = 30,000. SOLUTION OF PROBLEM 15 In the Books of Ramasamy MOTOR CAR ACCOUNT z z 41-14 | To Alagappan Ale 1,15,501 [31-12-14] By Depreciation Alc 11,550 By Balance old 1,03,951 1,15,501 11-18. | To Balance bid 31-12-15 | By Depreciation Alc 10,395 » | By Balance eld 93,556 1116 | To Balance b/d 31-12-16] By Depreciation A/c 9,356 » | By Balance old 84,200 93,556 14.17, | To Balance b/d RO HetN/4-18 HIRE PURCHASE AND INSTALMENT PURCHASE SYSTEys ALAGAPPAN ACCOUNT z z 1-14-14 | To Cash Ald 1-1-14 | By Motor Car A/c 1,15,501 (Down Payment) 24,000 |31-12-14] By Interest 4.575 31-12-14] To Cash Ale 33,600 To Balance old 62,476 [eee -— 1,20,076 [120.076 31-12-15] To Cash A/c ,600 | 1-1-15 | By Balance bid | 62,476 To Balance c/d 32,000 |31-12-15] By Interest A/c 3,124 65,600 65,600 31-12-41 To Cash Alo | 33,600 | 1-1-16 | By Balance bid 32,000 31-12-16] By Interest A/c 1,600 33,600 33,600 = Working Note CALCULATION OF CASH PRICE Instalment | Closing Balance | Amount of Total Interest Opening Instalment 5 1 | Balance 105% 21 z z z z z ML - 33,600 33,600 1,600 32,000 u 32,000 33,600 65,600 3,124 62,476 I L 62,476 33,600 al 96,076 4,575 91,501 Cash Price = Down Payment (& 24,000) + 91,501 = = 1,15,501. ST Soa aa ey SOLUTION OF PROBLEM 16 JOURNAL OF Z & CO. 2016 z z Jan. 1 | Sewing Machine A/c Dr. | 74,889 To X & Co. 20,000 "Y&Co. (1) 54,889 (Being 200 sewing machines taken over on hire purchase as per agreement) pa June 30 Interest A/c Dr. | (2) 1,647 To Y & Co. 1,647 (Being interest on ¥ 54,889 at 6% p.a. for six months) [na merest on < 54,889 at 6% p.a.forsixmonths) " |¥&Co. Alc Dr. | 14,770 To Bank 14,70 (Being the payment of instalment) " [Depreciation A/c Dr. 3,745 To Sewing Machines Alc 3,745 (Being depreciation @ 10% p.a._on € 74,889 for six months) " | Profit & Loss Alc Dr. 5,392 To Interest A/c 1,647 " Depreciation A/c 3,745 [ (interest and depreciation transferred to Profit & Loss Alc) ae RE PURCHASE AND INSTALMENT PURCHASE SYSTEMS ; u-tt/4-49 forking N w (1) oan of amount due to Y & Co. : Y&CO. (in the books of X & Co.) 201 2015 z June 30 |To Bank Jan. 1 |By Sewing Machines Dec.31|” Bank (200 x % 400) 80,000 Deo. 31" Balance cid 54,889 | June 30 |" Interest A/c (65 »* 000% ] 2,400 Dec. 31 | By Interest A/c (65 xz 67,630 x} | 2,029 84,429 The amount of % 54,889 is due to Y & Co. This amount will now have to be paid by 2Z&Co. to Y & co. (2) Se of Interest : S 8 , % 54,089 = 1,647. 700 “1 DEFAI UPR aes ea SOLUTION OF PROBLEM 17 In the Books of X MACHINERY ACCOUNT 2015 z] 2015 z Jan. 1 |To Hire Vendor A/c 14,900 | June 80 | By Depreciation Ale 745 30 |" Balance cid 14,155 | 14,900 2015 2016 July 1 | To Balance b/d 14,155 | June 30 | By Depreciation A/c 1,416 * 30|" Hire Vendor A/c 7,918 June 30 | By Profit & Loss A/c (Loss on default) 4,821 14,155 HIRE VENDOR ACCOUNT 2015 z | 2015 z June 30 |To Bank Alc Jan. 1 | By Machinery A/c 14,900 "30 |" Balance cid June 30 | By Interest A/c 447 2015 2015 Dec. 31 |To Bank A/c 4,000] July _1 | By Balance bid 11,347 Dec. 31|" Interest A/c 340 2016 2016 dune 30 |To Machinery A/c June 30|" Interest A/c 231 Loss to X on default = € 4,821. 14-20 SOLUTION OF PROBLEM 18 ! HIRE PURCHASE AND INSTALMENT PURCHASE SYSTEyg) In the Books of Delhi Co. MACHINERY ACCOUNT. Year Year = \ . 1 By Depreciation A/c 24,000 Desi) Balance cld 96,000 1,20,000 1 | By Depreciation A/c | 19,200 I |To Balance bid » Mumbai Co. Alc 63.000 ” Profit & Loss A/c 13,800 (Bal. figure) (Loss on default) 96,000 |_96,000 ae —— MUMBAI CO. ACCOUNT Year z| Year z 1 [To Bank Ale 30,000] . 1 |By Machinery A/c 1,20,000 Bank A/c 34,500 ” Interest A/c 4,500 ” Balance o/d 60,000 (6% on % 90,000) 1,24,500 |" Machinery A/c 63,000 ll | By Balance b/d 60,000 * Interest A/c 3,000 (5% on & 60,000) 63,000 Mumbai Co.s Books DELHI CO. ACCOUNT =| Year z 1 To Hire Sale A/c 1,20,000 ' By Bank A/c 30,000 * Interest Alc 4,500 "Bank Alc 34,500 * Balance c/d 60,000 1,24,500 1,24,500 I | To Balance bid 60,000 ll | By Repossessed ” Interest Alc 3,000 Stock Alc 63,000 REPOSSESSED STOCK ACCOUNT z z To Delhi Co. 63,000 |By Bank 70,000 Bank (Repairs) 5,800 * Profit & Loss Account 1,200 (Profit to Vendors) | 70,00 j 70.000 HIRE PURCHASE AND INSTALMENT PURCHASE SYSTEMS W-t/4-24 SOLUTION OF PROBLEM 19 In the Books of P MACHINERY ACCOUNT Year Year ' Dec. 31 | By Depreciation @ 10% " " Balance c/d Jan. 1 | To Hire Vendor M Jan, 1 | To Balance b/d " Dec. 31 | By Depreciation 7 "~ Hire Vendor " ”" P&L Al (Balancing Figure) 50,400 HIRE VENDOR ACCOUNT Year Year | z ' Jan. 1 | To Bank A/c 15,000 | Jan. 1 ByMachinery A/c Dec. 31 |” Bank A/c 15,000 |Dec. 31 |” Interest A/c " "Balance c/d 28,050 58,050 " " Dec. 31 | To Machinery A/c 29,453 | Jan. 1 ByBalance b/d Dec. 31 |" Interest A/c 29,453. , In the Books of Hire Vendor P’s ACCOUNT Year Year ! z ! z Jan. 1 | To Hire Sales A/c 56,000} Jan.1 | By Bank A/c 15,000 Dec. 31” Interest A/c 2,050 |Dec. 31 |" Bank A/c 15,000 " "Balance cid 28,050 58,050 58,050 Wl Ml Jan. 1 | To Balance b/d 28,050 |Dec. 31 | By Goods Repossessed Dec. 31)" Interest A/c 1,403 Alc 29,453, 29,453 GOODS REPOSSESSION ACCOUNT z z ToP 29,453 | By Cash (Sale) 30,100 To Cash (Exp.) 350 ToP &LAIc 307 . Mita ine PURCHASE AND INSTALMENT PURCHASE SY Tag PROFIT & LOSS ACCOUNT | T—. | By Goods Repossession A/c 20° SOLUTION OF PROBLEM 20 In the Books of Balu MACHINERY ACCOUNT T z on Tae 1-14 | To Kumar & Co. 1,00,000 | 31-12-14] By Depreciation A/c 10,000 By Balance o/d 20,009 4,00,000 1,00,009 | —= 1-1-15 | To Balance b/d 90,000 | 31-12-15 | By Depreciation A/c 9,000 By Kumar & Co. A/c 63,000 ByP&LAlC (Loss on default) 18,000 -—— 90,000 0,000 i ——— __ KUMAR & CO. ACCOUNT z z 1-1-14 | To Bank Alc 20,000 | 1-1-14 | By Machinery A/c 1,00,000 31-12-14] To Bank A/c 24,000 | 31-12-14 | By Interest A/c 4,000 31-12-14] To Balance old 60,000 1,04,000 31-12-15] To Machinery A/c 63,000 | 1-1-15 | By Balance bid 60,000 31-12-15 | By Interest A/c 3,000 63,000 63,000 _t E In the Books of Kumar & Co. MR. BALU'S ACCOUNT zi]. z 1-1-14 | To Hire Sale Alc 1,00,000 } 1-1-14 | By Bank Alc 20,000 31-12-14] To Interest A/c 4,000 | 31-12-14] By Bank Alc 24,000 ” | By Balance c/d 60,000 1,04,000 41,04,000 1-1-15 _| To Balance bid 60,000 | 31-12-15 | By Goods Repossessed A/c | 63,000 31-12-15] To Interest A/c |__3,000 63,000 63,000 GOODS REPOSSESSED ACCOUNT z z To Balu's Alc 63,000 | By Cash A/c 90,000 To Cash Alc 1,000 To Profit & Loss A/c (Profit on Repossession) 26,000 i wi pURGHASE AND INSTALMENT PURCHASE systems U-t/4-23 PET LGU LOSS LUTION OF PROBLEM 21 90! In the Books of the Company MACHINERY ACCOUNT z z Hire Vendor A/c 21,000 |By Depreciation A/o 2,100 to ____|" Balance ofa | 18,900 | 21,000 21,000 To Balance bid 18,900 |By Depreciation A/c 1,890 "Hire Vendor's Alc (1) 6,720 "Profit & Loss Ale 1,785 (Bal. fig.) (Loss on default) "Balance old 2) 8,505 18,900 : HIRE VENDOR'S ACCOUNT z z To Bank Alc 6,000 By Machinery Ale 21,000 "Bank Alc (¥ 5,000 + = 750) 5,750|"" Interest A/c 750 * Balance cid 10,000 21,750 21,750 To Machinery Alc (1) 6,720 |By Balance bid 10,000 To Balance o/d 3,780 |By Interest A/c 500 10,500 (1) Value of one machine repossessed by hire vendor : Cost Price Less : Depreciation @ 20% Less : Depreciation @ 20% Q) Cost Price Less: Depreciation @ 10% Less: Depreciation @ 10% Value of machine left with the buyer: SOLUTION OF PROBLEM 22 & 23 IN THE BOOKS OF MUMBAI LTD. 2013 1/0 Hindustan Machine Ltd. ~

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