Hire Purchase System Problem 1: Shri Bipin purchased a Bajaj scooter on hire purchased system from Arun Auto.

The total cash price of the scooter is Rs. 159 !" payable Rs. #!!! at the time of a$reement on 1 st %anuary &!!5 and the installment of Rs. '!!!. Rs. 5!!!" and Rs. &!!! payable at the end of the first" second and third year respecti(ely. )nterest is char$ed at 5* p.a. Rate of depreciation is 1!* p.a. on strai$ht line method. +ou are re,uired to $i(e necessary journal entries and led$er accounts in the boo-s of Shri Bipin and Arun Auto. Problem &: .n 1st %anuary" 199 /0s Bajaj Tradin$ 1o. purchased a machine on hire purchased system from /0s %ay 2n$ineerin$ 1o. the present cash price of the machine is Rs. 1!1!!!. The hire purchase a$reement pro(ides that Rs. 1'!!! shall be paid at the time of deli(ery and balance must be paid by four half yearly installments of Rs. &'3!! each. )nterest bein$ calculated at 1 * p.a. assumin$ that 1!* depreciation by strai$ht line method is bein$ 4ritten of e(ery year on the cash (alue of the machine. 5rite led$er accounts in the boo-s of both the companies. Boo-s are closed on 31 st /arch e(ery year. Problem 3: .n 1st %anuary" 199 " /r. She-har purchased a motorcycle on hire purchase system from Aditya A$encies. The cash price of the motorcycle 4as Rs. 5#!!!. /r. She-har a$reed to pay to the Aditya A$encies Rs. 1&!!! on si$nin$ the a$reement. The payments 4ere to be made in four ,uarterly installments of Rs. 1&!!! each. The first installment 4as to be paid on 31 st /arch 199 . The rate of interest is &!* p.a. depreciation is to be char$ed at 1!* p. a. on diminishin$ balance. Sho4 motorcycle A0c" Aditya A$encies A0c" and interest A0c in the boo-s of /r. She-har and /r. She-har A0c in the boo-s Aditya a$encies. Boo-s are closed on 31 st 6ecember e(ery year. Problem #: /r. 7aran purchased a colour Tele(ision from /0s 8andhi and Sons on 9ire purchase system" on 15 th %uly" &!!1" payin$ cash Rs. 15!!! immediately and a$reein$ to pay si:" monthly installments of Rs. &15! each at the end of e(ery month. The first installment is to be paid on 31 st %uly" &!!1. The cash price of the T.;. is Rs. 135!!. /0s 8andhi and sons char$es interest at &#* p.a. /r. 7aran 4rites off 1&*e(ery year as depreciation on the diminishin$ balance method. /r. 7aran has paid first four installments re$ularly but he could not pay the fifth installment on the due date. 9e paid the fifth installment in addition Rs. 1&! as penalty 4ith the last installment. Boo-s are closed on 31st /arch e(ery year. Prepare: i< T. ;. A0c" /0s 8andhi and sons A0c and interest A0c in the boo-s of /r. 7aran. ii< /r. 7aran A0c in the boo-s of /0s 8andhi and sons =calculations to be made to the nearest rupee.<

Problem 5: >a$pur 1ompany purchased motorcar from /umbai co. on 9ire purchase system on 1 st April 199&" payin$ cash Rs. 9'!!! immediately and a$reein$ to pay three further yearly installments as follo4s: =1< Rs. 1&1'!!" =&< Rs. 1!9!!!" =3< Rs. 99#'& each on 31 st /arch of e(ery year. The cash price of the

motorcar 4as Rs. 35?'!!. The /umbai 1o. char$es interest at 15* p. a. the >a$pur 1o. 4rites of 1!* e(ery year as depreciation on the diminishin$ balance method. Boo-s are closed on 31 st /arch e(ery year. 8i(e necessary led$er accounts in the boo-s of >a$pur 1o. Problem ': A colliery @td. a$reed to purchase a machine from Bharat machines @td. on the hire purchase system for Rs. #'!!!. Rs. '!!! 4ere paid 4hen a machine ac,uired on 1 st %an" 199 " and the balance 4as to be paid by fi(e annual installments of Rs. !!! plus interest at 5* p.a. A colliery @td depreciates the machine each year by 1!* on the ori$inal cost. Sho4 machine A0c and Bharat machines A0c in the boo-s of colliery @td. Problem ?: Purchaser /0s. Prashant A 1o. ;ender /0s. >a-ul A 1o. 6ate of a$reement 1.1.1991 Purchase system 9ire purchase Article /achine /ode of payment: .n a$reement Rs. &#!!! Three annual installments Rs. &5'!!" Rs. 35'!!" Rs. 33!!! Rate of interest 1!* p.a. Annual rate of depreciation 1!* on the diminishin$ balance method 5rite ;ender A0c and machine A0c in the boo-s of /0s Prashant A co. and also 4rite /0s Prashant A 1o. A0c in the boo-s of /0s >a-ul A 1o. /a-e calculations to the nearest rupee. Problem : m0s. A-ash printin$ press purchases a printin$ machine from /0s Abhay 2n$ineerin$ 1o. on hire purchase basis. A$reement 4as entered into in 1 st %uly 1999. 9ire purchase price of machine 4as a$reed to be paid in four ,uarterly installments of Rs. #!!!!" Rs. &!!!!" Rs. 15!!! and Rs. 35!!! respecti(ely. Birst installment 4as to be paid on 3!th Sept" C999. /0s Abhay 2n$ineerin$ 1o. char$es interest D 1&* p.a. on unpaid amount. /0s A-ash Printin$ Press char$es depreciation at &!* p. a. on diminishin$ balance of the printin$ machine. )nterest is to be calculated ,uarterly. The boo-s of accounts are closed on 31st 6ec e(ery year. Prepare interest A0c in the led$er of /0s A-ash Printin$ Press $i(in$ journal entries in the boo-s of /0s Abhay 2n$ineerin$ 1o. Problem 9: .n 1st %an 1999 a @td 1o. buys on hire purchase system some tools for Rs.&55!! payable by three e,ual installments combinin$ principal and interest" the latter bein$ a normal rate of 5* p.a. The present (alue of an Annuity of one Rupee for three years at 5* is Rs. &.?&3&5. 1alculate the cash price and find out the interest for each year.

Problem 1!: 8auran$ and 1o. purchased a T.;. set on hire purchase basis for Rs. &!!!! and ma-es the payment in the follo4in$ order: Rs. 6o4n payment #!!! 1st installment after one year of the a$reement !!! nd & installment after t4o years of the a$reement #!!! 3rd installment after three years of the a$reement #!!! The cash price of the T.;. set is Rs. 1?'!!. 8uaran$ A 1o. depreciates T.;. D 1!* on cash price annually. Prepare the necessary led$er accounts in the boo-s of 8uaran$ A 1o. /a-e calculations to the nearest rupee. Repossession of Asset Problem 11: Sa$ar purchased a machine from /0s Praya$ A 1o. for Rs. 5'!!!. Payment to be made Rs. 15!!! do4n and three installments of Rs. 15!!! each at the end of each year. Rate of interest is char$ed at 5* p.a. Sa$ar depreciates machine at 1!* p.a. on 4ritten do4n (alue method. Because of financial difficulties Sa$ar" after ha(in$ paid do4n payment and first installment at the end of first year" could not pay second installment and /0s Praya$ A 1o. too- possession of the machine. /0s Praya$ A 1o. after spendin$ Rs. 35! on repairs of the machine sold it for Rs. 3!11!. Sho4 the led$er accounts in the boo-s of both the parties. Problem 1&: /r. Arun purchased a moped from >a$pur Tradin$ 1o. on 1 st April 199'. The terms of payment are four annual installments of Rs. '!!! each at the end of the financial year. Birst installment 4as to be paid on 31st /arch 199?. )nterest is char$ed D &!* p.a. and is included in the annual payment of Rs. '!!!. /r. Arun char$ed depreciation at 1!* by strai$ht line method. /r. Arun fails to pay the installment due on 31 st /arch 1999. >a$pur Tradin$ 1o. obtained the permission of the court to repossess the moped as a result of default by /r. Arun and ha(in$ completed all the statutory re,uirements too- possession of the moped. .n 31 st /ay 1999 >a$pur Tradin$ 1o. after spendin$ Rs. &5! on repairs of the moped sold it a4ay for Rs. 1&!!!. Prepare necessary led$er accounts in the boo-s of purchaser and (ender. Problem 13: .n 1st %an 199 " A-ash ac,uired furniture on the hire purchase system from Sin$h Tradin$ 1o. a$reein$ to pay four half yearly installments of Rs. 9?5 each commencin$ on 3! th %une 199 . The cash price of the furniture 4as Rs. 3!!!. )nterest 4as char$eable at &#* p.a. )t 4as a$reed that in the e(ent of default A-ash should pay a sum of Rs. 1&!!. .n 31st 6ec 199 on the e(e of the payment of installment A-ash e:presses his intention to terminate the a$reement. The $oods 4ere repossessed by Sin$h Tradin$ 1o. and the necessary payment 4as made by A-ash in accordance 4ith the pro(isions of 9ire Purchase Act 19?&. Sin$h Tradin$ 1o. (alued the repossessed furniture at Rs. 15!! and incurred an e:penditure of Rs. &!! for repairs and (arnishin$. The furniture 4as sold on 31 st %an1999 at Rs. 19!!.

Sho4 necessary led$er accounts in the boo-s of Sin$h Tradin$ 1o. assumin$ that the 1o. passes hire purchase transactions throu$h its boo-s at sales. Part Repossession Problem 1#: Prasad purchased four motorcycles of Rs. 1#!!! each on hire purchase system from /0s 8andhi and sons. The hire purchase price for all the four (ehicles 4as Rs. '!!!!" to be paid Rs. 15!!! do4n and three installments of Rs. 15!!! each at the end of each year. )nterest is char$ed at 5* p. a. Prasad depreciates (ehicles at 1!* p.a. on strai$ht line method. After ha(in$ paid do4n payment and first installment" Prasad could not pay second installment and /0s 8andhi and sons too- possession of three (ehicles at an a$reed (alue to be calculated after depreciatin$ (ehicles at &!* p.a. on 4ritten do4n (alue method. .ne (ehicle is left 4ith Prasad. /0s 8andhi and sons" after spendin$ Rs. 1&!! on repairs" sold a4ay all the three (ehicles to /rs. Pooja for Rs. 35!!!. .pen led$er accounts in the boo-s of both the parties. Problem 15: 9anda Transport 1o. purchased t4o truc-s costin$ Rs.1&!!!! each from 7amal Auto @td. on 1 st %an 199? on the hire purchase system. The terms 4ere: Payment on deli(ery Rs. 3!!!! for each truc-. Remainder in three e,ual installments to$ether 4ith interest at 1!* p.a. to be paid at the end of each year. 9anda Transport 1o. 4rote off &5* depreciation each year on the diminishin$ balance method. 9anda Transport 1o. paid the installments due on 31 st 6ec 199? and on 31st 6ec 199 but could not pay the final installment. 7amal Auto @td. repossessed truc- adjustin$ its (alue a$ainst the amount due. The repossession 4as done on the basis of 3!* depreciation on the diminishin$ balance method. Prepare led$er accounts in the boo-s 9anda Transport 1o. sho4in$ the abo(e transactions.