Exercises

(A) Short Answer Problems

Computation of Interest
When Rate of Interest, Total Cash price & Instalments are given
1. Raman purchases a motor car from Bharathan whose cash price is Rs.56,000 on
1.1.93. Rs. 15,000 is paid on signingthe contract and the balance is to be paid in three
equal annual instalments of Rs. 15,000 each. The rate ofinterest is 5% p.a. Calculate
the amount of interest included in each instalment.
/Thiruvalluvar, B.Com., April 2004
 Purchase
and Instalment Purchase Systems 1842
Hire
H (Madras,BBA( Nov. 2008; Com. RCom.(CS) Aprd 2007; ACom,BC& ete. April 2005
JAns: Interest I year: Ra. 2050; Il year: Rs. 1403; 1Il year: Rs. 547]
Mohan purchases a car on hire purchase system. The total cash price of the car is
2. Rs.15,980, payable Rs.4,000 down and in three instalments of Rs.6,000, Rs.5,000
d Rs. 2,000 at the end of first, second and third years respectively. Interest is
and
charged at 5% per annum. You are required to calculate interest paid by hirer, each
year.
Madras, B.Com, Now 2005; B.C.S. Nov 2004; B.Com, Sep. 1986
Ans: Interest I year: Ra. 599; 1I year: Rs. 329; Il year921

When Rate ofinterest is not ghven

hire purchase agreement from Y. The cash príce of the
purchasedmachinery
3. Xmachinery under
was Rs. 15,500. The payment was to be made as follows
Rs.
On signing the agreement 3,000
First year end 5,000
Second year end 5,000
Third year end 5,000
Calculate interest for each year.
IPerlyar, BBA May 2006; Madras, B.Com., Sep. 19901
[Ans: Interest I year: Rs. 1,250; II year: Rs.833; IlI year Rs. 417]
Mr. Balu. The cash
4. Arul purchased machinery under the hire purchase system from
the purchase is to be made
was Rs. 15,000. The payment for
price ofthe machinery the Rs. 3,000; end of the first year Rs. 5,000; end of
as follows: On signing agreement amount of
the second year Rs. 5,000; end of the third year Rs. 5,000. Calculate the
interest included in each instalment.
[Thiruvalluvar, B.Com., Nov. 2005; Madras, B.Com, May 19971
III year Rs. 500]
Ans: Interest I year Rs. 1,500; II year Rs. 1,000;
for
5: A television set cash price of which is Rs.18,000 is sold on hire purchase system
The first payment is
payable in 4 quarterly instalments of Rs.5,000 each.
Ks.20,000 is calculated.
made at the end of the lst quarter. Show how interest
.Madras, B.Com, Sep. 19941
Rs. 600; Rs. 400; Rs. 2001
[Ans: Interest Rs. 800;
Wben Cash Price is not Given
information:
. Calculate cash price of a machine from the following
Rs
10,000
Down payment
4 annual instalments at the end of
10,000
each year
Rate of interest 5% p.a. 200
Mudras, BBA (old)
Nov. 2008; B. CA./B.Se. April45,459
Ans:Cash price Rs.
 1843 Financial Accounting
for Rs.1,000 to be paid as folloue
7. Mr. X purchased a cycle on hire purchase NS.
Rs.
On signing the agreement 120

At the end of the first year 170

At the end of the second year 160
At the end of the last year 550
The vendor charged interest at 10 % p.a on the cash value remaining unpaid eacs

year. Calculate the cash value of the cycle.

[Madras, B.Com., Aprl1984, March 1986, March 1981
Ans: Interest I year Rs. 70, 1I year Rs. 60, I1 year Ras
Cash Price: Ra. 820
8. Mr. Anbu purchased a machine by hire purchase system for Rs.30,000 to be paid as

follows:
Rs.
Down payment 5,000
At the end of the first year 7,000
At the end of the second year 6,500
At the end of the third year 6,000
At the end of the fourth year 5,500
nterest is charged on the value at 10 % p.a. At what value should the machinebe
capitalised ?
[Madras,B.Com, B.B.A. ete. Now. 2006; B.Com, B.Se, May 196|
Periyar, B.Com, Nov. 2005;
Bharathidasan, B.Com. Now. 199
[Ans: Interest I year Rs. 2,000; II year Rs.1,500;
Il year Rs. 1,000; IV year Rs. 500; Cash Price: Rs.
25,000
9. 'A' purchases two trucks on hire purchase system. He pays Rs. 50,000 down and
Rs. 60,000 at the end of 2nd year, 4th year and 6th year. Interest is charged by the
vendor at 10% with wo yearly rests on unpaid balance. Calculate interest paid with
each instalment.
[Bharathiar, B.Com. November1995
e s t A n s : Total cash price Rs. 1,99,211;
Interest: I : Rs. 14,921
II: Rs. 10,413
IM: Rs. 5,455]
10. 'A' purchases a bus on hire purchase from 'B' for Rs. 2,00,000. He pays Rs. 50,000
each at intervals of 2 years. "B' charges interest at 10% p.a. at yearly rests. Calculaic
the amount of cash price of the bus.
s Perbyar, B.B.A, ApriiMay200
 Purchase andInstalment Purehase Systems 1844
Hire
Anst Cash price i Rs. 1,27,022 Interent 1 Ra. 26,675
Ilt Rs. 21,776; Il: Rs. 15,849; IV 1
Hiat? lnstalments
Instaln
Rs. 8,678
are at 2 yeare ntervals, but interest is charged at 10% p.a. at
yearly rests. So, compou lnterest is to be Chleulated. Interest in the last

Instalment"50,000 Xa8,678,
121
An asset is
is purchased nder hire purchase ogreement which provides for five half-
purchased unde
1. Anasset
arly instalments of Ra. 6,000 ench, the first instalment being due on July 1, 1981
uming the npplicable rate of Interest is 10% p.a, calculate the cash value of the
machine.
IMadras, B. Com., Oet. 19971
Ans: Interest included in the instaiments:
Ist Rs. 1,299, 2nd Rs. 1,064, 3rd Rs. 817, 4th Rs. 558, 5th Rs. 286,
Total Cash Price Rs. 25,976]
Hint: Since instalments are half yeurly, the calculation for finding interest is with

not
10
the help of 105 T102
When instalment amounts are not given
trucks costing Rs. 50,000 each
12. K.A.STransport Ltd. purchased from Delhi Motors 3
down and the remainder
hire purchase system. Payment was to be made Rs. 30,000
Calculate interest for
in three equal annual instalments together with interest at 9%.
cach year.
IMadras, B.Comm, May 19931
IlI Rs. 3,600|
Ans: Interest I year Rs.10,800; lI year Rs.7,200;basis.year
Rs. 10,000 was
3. A Machine costing Rs. 50,000 was purchased on hire purchase
four equal instalments of Rs. 10,000
paid on signing the agreement and the balance in show the amount payable on
each annually with interest at 5%. Calculate interest and
each instalment. 1997
Madras, B.Com. Oct. 2001; Sepa
Rs. 1,500, Rs 1,000; Rs. 500;
Ans: Interest Rs. 2,000; Rs 10,5001
Rs. 11,500; Rs. 11,000;
Instalment amount: Rs. 12,000;
Calculatlon of cash price by annuity method
system payable 40,00Rs. annualy
X purchased a motor car onis 5%.purchase
hire annuity ofRe.
r Given the present value ofan
years. The rate of interest
0r10
for 10 years al 5% is Rs. 7.7217, calculate cash price. Rs.3,08,8681
Ans: Cash prce
factor given
Hint: Cash price Instalment x Annuity
1845
Fisancial Actoarting
the amount o be paid
o t e OWner if te
D. From the followinginformation,cakulate
the purchase of goods:
hire purchaser intends to complete Rs
6,00
Cash price
3,000
Down payment
39,000
Hire purchase price
24
No.of instalments
Instaiments paid by the hire purchaser 18
Medres, BCom, Mareck 1997
Rebate : Rs. St
Aas: Amount to be paid Ra. 8,500;
Hiat: 3,000xx500; 9,000-500 Rs.8,500.

Reponsessio
16. Ram purchased a truck under HP. System on 14-89 for Rs. 5,00,000. He proviied
20% depreciation under W.D.V. method. He had paid down payment and Ist ann
instalment but failed to pay second annual instalment. The vendor has taken away the
truck at Rs. 2,81,250. Compute the loss due to repossession assuming the accours
are closed on 31st March.
[As: Loss: Rs 38,75S
17. Ajay purchased four Cars costing Rs. 5,00,000 each on HP. System. The H.P. prie
is payable 25% down and the balance in three annual instalments. After having pai
down payment and first instalment, he could not pay second instalment and sellr
took possession of3 cars at an agreed value to be calculated after depreciating cars
25% p.a. on W.D.V. method. Compute the value of 3 Cars taken away by the vendor
As: Rs 843,75)
18. A company purchased two machines of Rs. 1,05,000 each on H.P. Systen. The
company writes of depreciation at 10% p.a. under W.D.V. method. The company
could vendor left one machine
not pay the second annualinstalment. The
comparnty adjusting the value ofthe other against amount due taking the machine
with te
20% depreciation under W.D.V. method. Compute the value machine left wi
ofone
the buyer.
ARs:Rs 85,050)
Instalment System :
19. From the following data. Prepare Interest suspense A/c under Instalment purchASE
system:
Interest included in lst instalment Rs. 1,50,000
Interest included in 2nd instalment Rs. 1,00,000
Interest included in 3rd instalment Rs. 50,000
 Purchase
and InstalmentPurchase Systems 1846
Hire (B) Other Exercises
in the boka of Buyer and Seller
and Ledger
Ltd. 9old a lorry to Arun on Hire purchase system. The cash price was
.l M'7.45,000. Rs. 2,00,000 was to be paid on delivery and the balance in three
45,000. Rs.
Rs the end of each year. "M"Ltd. charged interest of
instalents ofRs..2,00,000 each at
Anin depreclates
the lomy at 10% per annum on reducing balance method.
p.a.
necessary ledger
a/cs in the books of Arun.
Prepare
IMadras, B.CA. /B.Sc. (ICE) May 2001
[Ans Interest: It Rs.27,250; Rs. 18,613; III: Rs. 9,137
Balance in Lorry Ale: Rs. 5,43,105

The Madras Trading Co. purchased a motor car Bombay Motor Co. on hire
from
paying cash Rs.10,000 and agreeing to pay further
purchase agreement on I.1.80, each on 31st December each year. The cash price of
three instalments of Rs.10,000
Motor Co. charges interest at 5% p.a.
the car is Rs.37,250 and the Bombay
on the reducing balance
The Madras Trading Co. writes off 10% p.a as depreciation
method. Jourmalise the above in the books of both the parties.
Periyar, B.Com, Ap. 20041 [Tiruvalluvar, BCA Nou 2006
[Madras, BCom.(CS) ete. April 2005; B. Com, Oct. 1999; B.C.S. Oct. Sep. 19901
[Ans: Interest: 1 year Rs. 1363; Il year Rs. 931; III year Rs. 456;

Asset account balance: Rs. 27,155]

3. Rakesh purchased a motor car on hire purchase system. The total cash price of the car
is Rs. 15,980 payable Rs. 4,000 down and three instalments of Rs.6,000, Rs.5,000
Interest
and Rs.2,000 payable at the end of first, second and third years respectively.
is charged at 5% p.a.
in the books of both the parties. Rate of
You are required to prepare ledger accountsCalculations are to be made to the nearest
depreciation is 10% on straight line method.
upee.
/Thiruvalluvar B.C.A., Now 2006; Periyar, B.Comm, Nou 20041
IMadras, B.Com., Oct. 2003; BCS Oct. 2003; B.Com, Oct 1995}

Ans: Interest: I year Rs.599; II year Rs. 329; Ill year Rs.92;
Depreciation for all the three years-15,980x 10%- Rs 1,5981
Mr. Pankaj.
Mr. Gupta purchased machinery under hire-purchase agreementforfrom are
The cash price of the machinery was Rs. 15,500. The payments the purchase,
to be made as under
end
signing the agreement Rs. 3,000; First year end Rs. 5,000; Second year
Rs, 5,000; Third year
end Rs. 5,000.
depreciation
neces5a.ry ledger accounts in the books of both the parties charging
10% on diminishing balance method.
IMedres, BCom. (1CE) May 1999
1847
Financial Accounting
Ans: Interest 1st year: Rs. 1,250; 2nd year Rs. 8S3; Jrd year: Rs. 419
Machinery Ale balance at the end : Rs. 11,3001 7
5. On 1-1-93 Ramasamy company
purchased a car from Alagappan and company, A
the time of agreementa sum of Rs. 24,000 was paid
and the
out o1 CAsh down price of the car
balance would be payable in 3 cqual annual
p.a. The
instalments with interest
amount of last instalment including interest was Rs. 33,600.
at 5%
was to be provided at 10% p.a. on the reducing balances.
Depreciation
Prepare
(a) Motor Car Account
(6)Algappan A/c in the books of Ramasamy company.
IMadras, B.Com. (1CE) OCL 2000
Ans: Balance in Motor Car Ale Rs. 87,480
Cash price in last instalment Rs.
32,000:
Total Cash Price Rs. 1,20,000 (32,000x3+
24,000)
Interest: Rs. 4,800; Rs. 3,200 and Rs.
6 Mr. Raman purchased a
1,600
T.V. on Hire Purchase on the following terms:
Rs. 1, 200 to be paid on signing the
agreement.
Rs. 1,700 at the end
of the first year
Rs. 1,600 at the end
of the second year
Rs. 5,500 at the end of third and last
year.
The hire endors chaged interest at 10% per annum on cash value of the T.V. Mr.
Raman wished to provide
depreciation at 109% p.a. on the diminishing balance method
Write up the necessary ledger accounts in the books of both the
parties.
IMadras, BCom. Dec. 1992
Ans : Total Cash Price: Rs. 8,200;
7.
Interest:Iyear: Rs. 700; I1 year: Rs. 600; Ill year: Rs. 500
X Co Lid
purchased lories from Sugal& Co. on
ayment being made Rs. 2,98,500 down and Rs
hire-purchase system on 1-4
The instalments are 3,00,000 annually for three yeas
required
lories purchased was
to be paid on March
31, each year. The cash price
Rs. 9,30,000. Sugal & Co. of the
* Ca. Lid charged interest20% per annui
provided
method. The books ofdepreciation
on lorries 20% p.a. on the diminishing baiain
accounts are closed on March
Prepare necessary journmal entries and Ledger accounts31,in every year
the books of X Ca. La
Pondickemy, BCom Dec. 200
As: Interest: 1: Rs 1,26,306
I:Rs91,560; l: Rs 564
Aaset A/e Balance : Rs
4761
 PurchaseandInstalment
Purchase Systems 1848
Hire
Complete Repossession

ADurchased a machine from B Lid. for Rs. 5,60,000; payment to be made

&.50.O00
R down and three instalments ofRs. 1,50,000 each at the end of each year.
at T 0 per annum on writen down value method.
He depreciates the Asset
Recause of financial ditficulties, Mr. A after having paid down payment and first
talment at the end ofthe first year, could not pay second instalment and the seller

ook possession of the asset.

in the books of both parties to record the transactions.
Open ledge account
Medras, BCom. B.Com.(Cs) Now 2008 (Modfied); B.CA/B.Sc. April 20011
[Ans: Transfer from Hire Vendor Ae To Machinery Ale: R. 2,93,333;
Loss due to Repossession; Rs. 1,60,267
9. Mt. Balu purchased a machinery from Kumar & Co., on hire-purchase system on
1-1-1995. The cash price ofthe machine was Rs. 1,00,000, Rs. 20,000 to be paid at
the time oftaking delivery and balance by four instalments of Rs. 20,000 plus interest
@5%on yearly balances.
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. 1,000
for reconditioning and re-sold the machinery for Rs. 90,000.
Show the ledger accounts in the books of Mr. Balu and Kumar & Co.
[Madras, B.C.S. Oct 20001
[Ans: Loss due to repossession Rs. 18,000
Unpaid Balance Transferred to Machinery Ale: Rs. 63,000;
Gain on sale of repossessed gods to Vendor: Rs. 26,000;
Interest in lst instalment: Rs. 4,000;
2nd instaiment : Rs. 3,0001
A machinery was purchased on Hire Purchase basis by agreeing to pay four annual
instalments of Rs. 4,230 at the end of each year commencing from the date of the
agreement. Interest is charged@ 5% and is included in annual payments of Rs. 4,230.
ohow Machinery account and Hire Vendor account in the books of purchaser when he
commits a default in paying third instalment and the asset was repossessed. Purchaser
provides depreciation on the Machinery @ 10% p.a. on S.L.M.
IMadras, B. Com Oct 2000
Ans: Loss dueto Repossession : Rs. 2,241;
Transfer from Hire Vendor AWc: Rs. 8,259;
Interest: Rs. 750; Rs.576; Rs. 393 and Rs. 201; Cash price Rs. 15,000
L a purchased a piece of Machinery on Ist January 1980 on the hire purchase
R h e cash price of the machinery was Rs. 29,800. Terms ofpaymen wn
8,000 half yearly over two years, the first payment to be made on 30th June 1930.
18.49 Financial Accountin
off
ale of interest was 6% p.a. X Ltd wrote 10% deprecintion under W. D.V
and closed its books on 30th June every year. It could not pay the instal
talment nethod
e on
JUth June 1981 and as a consequence, the hire vendor took possession o he
Give the Machinery Aceount and show the loss suffered by X Lad. machinery
IMadras, B.Com., Nov. 19811
[Ans:Los on
repossession: Ra. 9,643
Hire Vendor A/e balance transferred to Machinery Ale: Ra. 15.2
Interest: I Instalment Rs. 894; II Instaiment Rs. 681
III Instalment Rs.461
12. Mohan purchased on 1st October 1992,a machine on hire purchase system.Thec
price was Rs. 20,000. Payment was to be made as to Rs. 5,000 down and Rs 4
annually for five years. The machine was depreciated at15% p.a. on the diminishine
value. The third annual instalment could
not be paid and the vendor seized the
machinery. Record the above transactions in the books of Mohan assuming account
areclosed on 31st Dec.

(Madras, B.Com., April 1983)

[Ans: Interest: I year Rs. 1,667; Il year Rs. 1,333; Il year Rs.
1,00
Loss on Repossession: Rs. 1,343; Transfer from Hire Vendor
A/e Rs. 11,00
Hint: Depreciation in 1992 is for 3 months and in 1995 it is
for 9 months.
Partial Repossession
13. Balaji & Co. purchased from the
vendor fwo machines of Rs. 10,500 each on hire
purchase system. The payment was to be made Rs. 6,000 down and the remainder in
three equal instalments of Rs.
5,000 each together with interest at 5% p.a. Balaji &
Co. writes off
depreciation at 10% p.a. on written down value. They could not pay
their second instalment. After
one plant with the
negotiations, it was agreed that vendors would leave
purchaser, adjusting the value of the other against amount du
treating the machines at 20% depreciation on
Show accounts in the books of
diminishing balance.
Balaji & Co.
Madras, B.Sc, May 19971
Ans: Instalment amount: I- Rs.
5,750; II- Rs. 5,500; Ill- Rs. 3250
Loss on
default -Rs. 1,785; Value of repossessed stock-B 6,72
Value of one machine left with the yer- Rs. 8,8
14. Kumar purchased 2
machines
hire-purchase system. The termscosting Rs. 80,000 each from Peter on 1994 0

were as follows l
Payment on delivery Rs. 20,000 for each equal instalmenls
and also separately the
interest at 10% p.a.machine, remainder in 3 equal u
to be paid at the end year.
Kumar writes-off 25% depreciation of eacn
ng balance methoa
Kumar paid the instalments due each year on the diminishing
the final instalment.
on balannot
31-12-1994 and on 31-12-1995 but co uldnotpay
H i r eP u r c h a s e
e and Instalment Purchase Systems 1850
r e - p o S s e s s e d
one machine on 31-12-199 adjusting its value against the amount
the basis of 30% depreciation on the diminishing
Peter
re-possession was done on
that the balance, still lying due, will be paid offnext year in
The
due.
nce method, assuming
1997.
the above transactions, upto
in the bookS of Kumar showing
write up ledger accounts
31-12-1996.
IMadras, B.C.S. April 2000
Rs. 27,440;
[Ans: Value of machine taken away :

: Rs. 6,310;
retained : Rs. 33,750; Lo8s due to repossession
Value of machine
Balance in vendors Ae:Rs. 16,560;
Interest: 1st year :12,000;
2nd year: Rs 8,000; 3rd year : Rs 4,000
Distributors 3 trucks costing
Transport Ltd, purchased from Roy Auto
15. Laha
each on the hire purchase system.
Payment was to be made Rs. 30,000
Rs. 50,000 with interest@9%p.a. Laha
the remainderin 3 equal instalments together
downand 20% p.a. on the diminishing
balance. It paid the
writes off depreciation at Distributors
Transpott but could not pay the next. RoyAuto
instalment due at the end offirst year other 2 trucks
truck with the purchaser, adjusting the value of the
agreed to leave one
were valued on the
basis of 30% depreciation
the amount due. The trucks
against accounts in the books of
Laha Transport Ltd
annually. Prepare the necessary ledger date of
for all the transactions taking place on the
entries
for 2 years. Show Jounnal of the hirers.
accounts in the books
default. Also show the necessary
Oct 1999; BSe Oc 1997;
Madras, BCS (ICE)
Oct 1985, May 1936
Madras, B.Com, 1985,
Rs. 10,800; II year: Rs 7,200;
Ans: Interest: I year:
trucks taken away; Rs 49,00
Value of 2
with the buyer: Rs 32,000,
Value of ome truck left
Rs 15,00
Loss on accownt of repossession
be on diminishing
should also be assumed to
Hint: Sellers' rate of 30% depreciation
balance Method.
Superfine Television
television sets from
television dealer, bought 5
10,
On 1-1-1994, X, a
price cash of each set was Rs 20,000, it
was agreed that

Co, on hire purchase. The immediately and the balance in three instalments
of
Rs. 25,000 should be paid The Television Co., charges interest
10%
Rs. 30,000 each at the end of each year. balance
on the diminishing
television sets at 20% p.a
P.a The buyer depreciates
method instalment.
but failed to pay the last
paid cash down and two instalments with the
Television Co., repossessed three sets, leaving two sets
onsequently, the
1The sets repossesse
adjusting the value of3 sets against the amount due.
Dyerand on the written
down value The ses
were valued on the basis of 30% depreciation p.a.
18.51 Financial Accounting
Tepossessed were sold by the Television Co., for Rs. 30,000 after necessary repair
amounting to Rs. 5,000. Open necessary ledger accounts in the books of both the
parties.
IMadras, B.CA. / B.Sc. (ICE) Oct. 200o
Ans Loss dueto repossession : Rs 10,140
Balance in Hire Vendor's Alc : Rs. 9,420:
Balance in Asset A/e : Rs. 20,480
Repossessed goods: Rs. 20,580; Profit on Resale: Rs.4,4201
17. Ramola purchased four machines of Rs. 14,000 each by Hire Purchase system. The
hire purchase price for all the four machines was Rs.60,000 to be paid as Rs. 15.000
down and 3 instalments of Rs.15,000 each atthe end of each year. Depreciation is
Written off at 10% per annum on the straightline method.
Down payment and first instalment were paid. On the default of second instalment
vendor took possession of three machines, leaving one machine with buyer. The
thachines were taken by the vendor at a depreciated value of 20% per annum under
written down value method. Vendor has spent Rs. 1,200 on repairs and sold the three
machines for Rs. 35,000.
.Give the ledger accounts in the books ofRamola and Hire Vendor.
Madras, B.Com(PZA).Ap 2007; B.Com. (1CE) Oct. 2001; Mar. 1995, Mar. 1993[
[Ans: Value of Machines taken : Rs. 26,880;
Value of Machine not taken Rs. 11,200; Loss to buyer Rs. 6,720
18. The Midland Company acquired five scooters on hire purchase system from the
Vespa Company, the cash price for each scooter being Rs. 5,000. The price was
payable in five instalments of Rs. 1,100 each ever year, the first being paid on signing
the contract. The instalments included interest charged at 5% per annum. The Midland
Company decided to provide depreciation at 10% p.a. calculated on the diminishing
balance method. It has paid the instalment due at the end of the first year but could not
pay the next.
Give necessary ledger accounts in the books of both the parties for two years, if the
Vespa Company agreed to leave three scooters with the Midland Company adjusting
the value of the other two scooters against the amount due. The scooters were valued
on the basis of 20% depreciation
annually. The hire vendor spent Rs. 400 on geting
the scooters thoroughly over hauled and sold them for Rs. 8,800.
IMadras, BCom, Oct 1996
[Ans: Interest payable I Year Rs. 975; II year Rs. 74%
Value of three scooters left with the buyer: Rs. 12,150%
Value of two scooters taken away by hire vendor: Rs.
6,400
Loss on Surrender transferred to P& LAc: Rs
1,700
19. On 1.1.84 five trucks were purchased by 'A' on hire purchase system. The cash price
of each truck is Rs. 55,000. The payment was to be made as follows:
10% ofcash price down.
25% of cash price at the end of each of the 4 subsequent-half years.
Hire
Purchaseand Instal Purchase Systems
The payment due on 31.12.84could not be made 1852
vendors: But after negotiations, A' was
and hence true
trucks
allowed to keep three truckswere seized by the
that the value of the other two trucks could
that be adjusted on the
trucks being valued at cost less 25% against the amount condition
condition
ch vear and he charges 15%%
depreciation
depreciation.
A's books
on trucks on
are closed on
30th June
The vendors spent Rs. 6,000 on the original cost.
getting the trucks thoroughly overhauled and
them for Rs. 95,000. Show the various accounts in the books of sold
both
both the parties.
parties.
Hints: Total interest H.P. Price
Cash Price
-
(Madras,
B.Com, Sept. 19861
H.P. Price Down Payment + 4 Instalments.
=

[Ans: Interest in instalments, first Rs.

Third Rs. 5,500; Fourth Rs. 2,750; 11,000; Second Rs. 8,250,
Value of 3 tracks left with
the bayer Rs. 1,40,250
and value of 2 trucks taken
away: Rs. 82,500;
Loss on Sarrender Rs
Profit on sale of
11,000
20. Kumar purchased seven trucks on
Repossessed stock A/e Rs 6,500]
truck was Rs. 50,000. He was to hire-purchase 1-7-1994. The cash price of each
on
pay 20% of the cash price at the time of delivery and
the balance in five
half-yearly instalments starting from 31-12-94 with interest at 5%
P.a.
Kumar failed to pay the instalment due on 30-6-95. It was agreed that Kumar would
return 3 trucks to the vendor. The returning price of3 trucks were Rs. 40,500 each.
Kumar charges depreciation at 20% p.a. Vendor after
sold away all the 3 trucks for Rs. spending Rs. 1,000 on repairs
40,000 each. Show the trucks account in the books
of Kumar. Account closing date 30th June.
[Madras, B.Com. (ICE) OCL 1998; BA, (Corp) Sep 19977
[Ans: Closing balance on 30th June Rs. 1,60,000;
Profit on surrender of 3 trucks Rs 1,500;
Interest: 1st Instalment Rs. 7,000; 2nd Instalment Ra. 5,600
Hire Purchase
Trading Account
(a) Debtors Method
41. X
Company Ltd. has a hire purchase department. Goods are sold on hire purchase at
s plus 50%. From the following particulars find out the profit or loss made in the
Hire Purchase department.
Rs
Jan. I Goods out on H.P. (at H.P. price) 75,000
Goods sold on H.P. during the year (at H.R. price) 4,05,000
Cash received during the year 2,80,000
2,s00
Goods received back (instalments due Rs. 20,000)
1,50,000
Dec. 31 Goods with H.P. Customers (at H.P price)
1853 Financial Accounting
IMadras, B.Com. Oct. 1998 1 ues]
[Ans: Proft: Rs. 92,500; Instalments due at the end : Rs, 30,0
22. A trading company has a hire purchase department. Goods are sold on hire purchase
on cost plus 40%. From thefollowing information, prepare Hire purchase Tading
Account, in the books of the company:
Rs.
1-1-2000 Goods out on hire purchase
at hire purchase price 63,000
31-12-2000 Goods sold on hire purchase
at hire purchase price 3,15,000
Cash received
2,10,000
Goods repossessed
(Hire purchase instalments unpaid
Rs. 8,400) valued at
2,400
Goods with hire purchase customers
at hire purchase
price | 1,36,500
[Madras, B.CA. /B.Se. April 200%
Madras, B.CA./B.Sc. (ICE) Oct. 2001
[Ans: Closing instalment due Rs. 23,100;
Profit Rs. 63,000
23. Anun sells goods on hire
are given to you
purchase basis at a profit of 50% on cost. Following particula
relating to the business during 1999:
Rs.
Hire purchase stock (at
selling price) as on
1-1-1999
9,000
Instalments due on 1st January, 1999
5,000
Goods sold on hire purchase
during the year 87,000
(at selling price)
Cash received from hire purchase
customers during the year
60,000
Goods repossessed (Instalments due Rs.
2.000)
value at
500
Hire purchase stock (at selling price) as on
31st December, 1999
Instalments due on 31st December, 1999
30,000
9,000
Prepare Hire Purchase Trading Account showing the
profit earned for 1999.
 Purchase and Instalment Purchase Systems 1854
Hire
IMadras, B.Com. (1CE) May 2001/
[Ans Profit: Rs. 20,5001
24. From
the following particulars, prepare Hire Purchase Trading and Profit and Loss
eountsin the books ofa Trader, who sells goods on hire purchase systerm adding
KO%to the cost. There was no stock of goods in the shop of the trader in the beginning
or at the end of the year.
Rs.
1999
Jan. 1 Stock with customers at selling price 21,600
Dec. 31 Goods sold on hire purchase 87,120
Cash received from customer 57,720
Stock with customers at selling price 48,000
Instalments due 5,000
[Bharathiar B. Com, Nov. 2004
Madras, B.Com, B.Com(Cs) Ap. 2008; BCS(ST24)
Ap 2007; B. Com, Novw. 2005; B.CABSc. April 20011
[Ans: Opening Instalments due Rs. 2,000; Profit Rs. 22,7701
25. Exe Ltd, has a hire-purchase department. Goods are sold on hire
purchase at cost plus
60%. From the following particulars find out the
profit or loss made in this department.
1985
Rs
Jan. Goods out on hire purchase (at hire purchase price)
1
16,000
Dec. 31 Goods sold on hire
purchase during the year
(at hire purchase price) 80,000
Cash received during the year
56,000
Goods received back valued at 300
(hire purchase instalments unpaid Rs. 2,000)
Goods with hire purchase customers (at hire
purchase price) 36,000
[Madras, B.Com, May 1982, March 19871
[Ans: Profit Rs. 20,800; Instalment due on 31.12.85 Rs.
40. Atrader sells goods on Hire Purchase 2,000
System. Prepare
a5Suming that the seller charges 20% profit on cost Hire Purchase Trading Account
price.
1998 Rs.
Jan. 1 Stock out on hire
purchase 4,500
Stock in hand at shop
600
Instalment overdue 400
1855 Vinaneial AsMnt
1993
Dec. 31 Stock on hire at Hire Purchase Prics 4,00
Stnck in hend
Instalments overdue
Purchases during the yea 6,40
Cash received duríng the year | 6,JM
IMadras, B.C.S. (ICH) Ou 2011
[AnsProft Ra.1
27. X Lid sells products on hire purchase terms the price being cont plus 33/% Fu
the following particulars for 1981 prepere the necessary accunts o reveal the pde
eaned
1981
Jan 1 Stock on hire st hire purchase price 40,000
Stock in hand, at shop 5,000
Instalments due (customers still paying) 3,000
Dec 31 Stock out on hire at hire purchase price 46,000
Stock in hand, at shop 2,000
Instalmets due (customers still paying) 5,000
Cash received during the year | 80,000
(Madras, B.Com. (1CE) May 20
B.Se. Oct. 1998; B.Com. Aprl 198
[Ans: Parchases Rs. 63,000; Profit Rs. 20,5
Hist: Refer llustration 13
28. The folkowing are the particulars from the books of a trader who sells goods ofsmal
value on hir-purchase system at 50% profit on cost
1991 Rs
Jan. 1 Stock with the customers 9,00

Stock in the shop 18,00

,000
Instalments due
20,500
Dec. 31 Stock in the shop
Instalments due 9,000

SO0
Goods Repossessed (instalments due Rs. 3,000) valued at
which had been Iincluded in the stock at the end at Rs. 500
Cash received from customers
o0,00

O0,00

Goods purchased during the year at cost

Prepare Hire Purchase Trading A/c for the year 1991.
Madras, B.Com (ICE) oCL 1999 (3
[ABs: ProfM Rs. 19,833; Stock with eustomers (cloaing) K
 and Instalment
se and Insta Purchase Systems 18.56
Purchase
Hire Debtors
system

Stock&
() Co Ltd which sells a patent product on HP. terms, has the following
29. Mohan Co for the year
sactions 12.92. The gross profit is 25% on selling price.
Rs.

1.1.92
Stock out on Hire at H.P. Price 20,000
Stock in hand (in the shop) 2,500
Instalments due (customers still paying) 1,500
Stock out on Hire at H.P. Price 23,000
31.12.92
a Stockin hand (in the shop) 3,500
Instalments due 2,500
Cash received on instalments during the year 40,000
to find out Gross Profit of Mohan Co. Ltd for the
Prepare the necessary accounts
year 1992, under stock & debtors system.
Madras, B.Com, B.Com.(CS) Nov. 2008( Fies; B.C.S. Oct 1998

[Ans: Purchase Rs. 34,000; Profit Rs. 10,250]

30. Mr. S.R.S. sells goods on Hire purchase at cost plus 50%. From the following particulars
prepare the necessary ledger accounts, under stock & debtors system for the year
ended 31.12.94.
Rs.
Jan. 1 Stock with hire purchase customers at selling price 45,000
Stock at shop at cost 90,000
Instalments due 25,000
Dec. 31 Cash received from customers 3,00,000
Goods Repossessed (Instalments due Rs. 10,000) valued at 2,S00
a Instalments due, customers paying 45,000
Stock at shop at cost (excluding re-possessed goods) 1,00,000
Goods purchased during the year 3,00,000
Pondichery, B.Com Dec. 2000
[Ans: Profit Rs1,02,500
Instalment Purchase System
On 1-1-90 Velan bought a machine from Devi& Co. on the instalment system. he
t price of the machine was Rs. 17,430 and the payment was to be made as follows
Rs. 5,000 to be paid on signing of the agreement and the balance in three instalments
of Rs. 5,000 each at the end of each year. It is agreed to cha interest at the rate of
Dy Devi & Co., Velan has decided to write off 159% annually on the diminishin
e on the value ofthe assets. Show the ledeer accounts in the books ot velau
1997
Madras, B Comm, Sept
18.57 Financial Accounting
Ans: InterestInstalments: 1st Rs. 1,243; 2nd Rs. 867; 3rd Rs. 460:
Total Interest suspense Ale: Rs. 2,570
Closing balance of machine : Rs. 10,704.201
32. On 1.1.95 the Colliery Company purchased 5 wagons on the instalment system. The
cash price of the wagons was Rs. 1,490 and Rs. 400 was to be paid on signing the
agreement and the balance in three instalments of Rs. 400 each at the end of each year
Interest is charged at 5% per annum by the wagons company. The Colliery Company
has decided to write off 10% annually on the diminishing balance of the cash value.
Make the entries and open the necessary accounts in the books of both the parties
[Madras, B.Com. May 2002 (10 ttmes)]
[Ans: Interest: I year: Rs. 54.50; II year: Rs. 37.22;
II year: Rs. 18.28; Interest Suspense A/e Rs. 1101
33. Vasantham company purchased a motor car from Sivan on the instalment system on
Jan. 1, 2000 paying cash Rs,. 20,000 and agreeing to paythree further instalments of
Rs. 20,000 cach on 31st Dec. of the coming years. The cash price of the car is
Rs. 74,500 and Sivan charges interest at 5% per annum. Vasantham writes off
depreciation at 10% per annum on Written Down Value Method.
Show the ledger a/cs in the books of Vasantham and Sivan.
[Madras, B.CA. /B.Sc Oct. 2001]
[Ans:Interest: 2000: Rs. 2,725; 2001: Rs. 1,861; 2002:Rs.914;
Balance in Machinery Alc Rs. 54,310]
34. On 1.1.1994 Hari purchased machinery under instalment system. The down payment
wasRs. 10,000 and the balance is payable in four annual instalments of Rs. 10,000
each. Interest is charged at 5% per annum. Hari writes off depreciation at 15% p.a. on
straight line method. Calculate the cash price of the machine, interest and give journal
entries in the books of Hari.
IMadras, B.Com, Oct. 1996|
[Ans: Interest: I year: Rs. 1,773; II year Rs. 1,362;
III year Rs. 930; IV year Rs. 476; Total Cash Price Rs.
35. Mohan purchased a plant on instalment system from Rathnam & Co., on 1.1.90. The
45,459
cash down price for the plant was Rs. 60,000. The
price was to be paidtrom
Rs. 19,152 down and the balance in three equal annual instalments commencing
31.12.90 at 5% interest per annum.
Re.1 can buy annuities of Rs. 0.367215 at 5% for three
years.
Show jourmal entries in the books of both buyer and seller the books
closed on 3lst December each year and depreciation is chargedassuming
at 10% p.a. on reducinare
instalment method. Also show how the items will appear in the balance sheet o
Mohan on 31.12.90.

Madras, B.Com, Sep. 1994

 Systems 18.58
Hire Purchase and Instalment Purchase
II
IAns: Interest I year- Rs. 2,042; year-Rs. 1,395; year-Rs.
II 715

Rs.
Hints:
Cash Price 60,000
Down Payment 19,152
Less
annual
Balance to be paid by 3 equal
instalment at 5% p.a. 40,848
Annuity Factor
0.367215
0.367215x 40848
Instalment
- 15,000 (approx)