UNIT 5
Hire purchase
Q1) Based on particulars given below calculate Interest under the hire purchase system
(a) X & Co.—purchaser Y & Co.-Seller Date of purchase—Jan. 1,1999
cash price—Rs.74,500.
Installments Rs.20,000 on signing of the agreement. Rest in three instalments of Rs.20,000 each. Rate of Interest—5%. Depreciation 10% on the diminishing Balance.
(b) All particulars as above except that the rate of interest is notgiven.
(c) All particulars as in (a) above except that the cash price is notgiven.
A1)
(a) Calculation of Interest | ||
|
| Rs. |
Jan.1, 1999 | Cash Price | 74,500 |
| Less-Cash down | 20,000 |
| Balance Due | 54,500 |
| Interest @ 5% for 1999 | 2,725 |
Dec.31, 1999 | Total | 57,225 |
| Amount paid | 20,000 |
Jan.1, 2000 | Balance Due | 37,225 |
| Interest for 2000 @ 5% | 1,861 |
Dec.31, 2000 | Total | 39,086 |
| Amount paid | 20,000 |
Jan.1,2001 | Balance due 2001 | 19,086 |
| Interest for (balancing figure) 2001 | 914 |
Jan.1,2002 | Amount paid | 20,000 |
(b) Calculation of interest when the rate of interest is not given:
Hire Purchase Price | 80,000 | ||||
Cash Price | 74,500 | ||||
Total interest | 5,500 | ||||
|
|
|
|
|
|
Year | Amount Outstanding | Ratio | Interest | Rs. | |
1 | 60,000 |
| 3 | 3/6 x 5,500 | 2,750 |
2 | 40,000 |
| 2 | 2/6 x 5,500 | 1,833 |
3 | 20,000 |
| 1 | 1/6 x 5,500 | 917 |
(c) Calculation of cash price, rate of interest being given:
Instalment | Amount due at the end of the year (after payment of Installment) | Instalment paid | Total amount due at the end of the Year (before payment of instalment) | Interest @ 1/21 | Principal due in the beginning | |
| Rs. | Rs. |
| Rs. | Rs. | Rs. |
3 | Nil | 20,000 |
| 20,000 | 952 | 19,408 |
2 | 19,048 | 20,000 |
| 39,048 | 1,859 | 37,189 |
1 | 37,189 | 20,000 |
| 57,189 | 2,723 | 54,466 |
|
|
|
|
| 5,534 |
|
Cash Price: 54,466 + cash down, Rs.20,000 or Rs.74,466.
Q2) 1st January, 2000 Mr. A purchases from Mr. B machinery whose cash price is Rs. 15,000; Rs. 5,000 is to be paid down, that is on signing of the contract, and Rs. 4,000 is to be paid at the end of each year for 3 years. Rate of interest is 10% p.a. Prepare B’s account in the books of Mr. A
A2)
A’s Books
Dr. |
|
| B’s Account |
| Cr. |
|
| Rs. |
|
| Rs. |
2000 |
|
| 2000 |
|
|
Jan.1 | To Cash | 5,000 | Jan.1 | By Machinery A/c | 15,000 |
Dec.31 | To Cash | 4,000 | Dec.31 | By Interest A/c | 1,000 |
’’ | To balance c/d | 7,000 |
| (10% on Rs. 10,000) |
|
|
| 16,000 |
|
| 16,000 |
2001 |
|
| 2001 |
|
|
Dec.31 | To Cash | 4,000 | Jan.1 | By Balance b/d | 7,000 |
| To Balance c/d | 3,700 | Dec.31 | By Interest A/c |
|
|
|
|
| (10% on Rs. 7,000) | 700 |
|
| 7,700 |
|
| 7,700 |
2002 |
|
| 2002 |
|
|
Dec.31 | To Cash | 4,000 | Jan.1 | By Balance b/d | 3,700 |
|
|
| Dec.31 | By Interest A/c* | 300 |
|
| 4,000 |
|
| 4,000 |
Q3) Based on particulars given below calculate Interest under the hire purchase system
X & Co.—purchaser Y & Co.-Seller Date of purchase—Jan. 1,1999, Cash price—Rs. 74,500.
Installments Rs. 20,000 on signing of the agreement. Rest in three instalments of Rs. 20,000 each. Rate of Interest—5%. Depreciation 10% on the diminishing Balance.
A3)
Calculation of Interest | ||
|
| Rs. |
Jan.1, 1999 | Cash Price | 74,500 |
| Less-Cash down | 20,000 |
| Balance Due | 54,500 |
| Interest @ 5% for 1999 | 2,725 |
Dec.31, 1999 | Total | 57,225 |
| Amount paid | 20,000 |
Jan.1, 2000 | Balance Due | 37,225 |
| Interest for 2000 @ 5% | 1,861 |
Dec.31, 2000 | Total | 39,086 |
| Amount paid | 20,000 |
Jan.1,2001 | Balance due 2001 | 19,086 |
| Interest for (balancing figure) 2001 | 914 |
Jan.1,2002 | Amount paid | 20,000 |
Q4) Based on particulars given below calculate Interest under the hire purchase system
X & Co.—purchaser Y & Co.-Seller Date of purchase—Jan. 1,1999, Cash price—Rs. 74,500.
Installments Rs. 20,000 on signing of the agreement. Rest in three instalments of Rs. 20,000 each. Depreciation 10% on the diminishing Balance.
A4)
Calculation of interest when the rate of interest is not given:
Hire Purchase Price | 80,000 | ||||
Cash Price | 74,500 | ||||
Total interest | 5,500 | ||||
|
|
|
|
|
|
Year | Amount Outstanding | Ratio | Interest | Rs. | |
1 | 60,000 |
| 3 | 3/6 x 5,500 | 2,750 |
2 | 40,000 |
| 2 | 2/6 x 5,500 | 1,833 |
3 | 20,000 |
| 1 | 1/6 x 5,500 | 917 |
Q5) A fire occurred in the business premises of Rajesh Traders on 15th October, 2010. from the following particulars, ascertain the loss of stock and prepare a claim for insurance.
Stock on 1-1-2009 Rs.15,300
Purchases from 1-1-2009 to 31-12-2009 Rs.61,000
Sales from 1-1-2009 to 31-12-2009 Rs.90,000
Stock on 31-12-2009 Rs.13,500
Purchases from 1-1-2010 to 14-10-2010 Rs.73,500
Sales from 1-1-2010 to 14-10-2010 Rs.75,000
The stock were always valued at 90% of cost. The stock saved was worth Rs.9,000. The amount of the policy was Rs.31,500, there was an average clause in the policy.
A5)
trading account | |||
particulars | amount | particulars | amount |
To opening stock | 17,000 | By sales | 90,000 |
To purchase | 61,000 | By closing stock | 15,000 |
To Gross profit | 27,000 |
|
|
| 1,05,000 |
| 1,05,000 |
Memorandum Trading Account
for the year ended 15-10-2010
Dr. Cr.
Particulars | Amount | Particulars | Amount |
To opening stock To Purchase To Gross Profit (75,000 × 30 / 100) | 15,000 73,500 22,500 | By Sales By closing stock (Stock on the date of fire)
| 75,000 36,000
|
1,11,000 |
| 1,11,000 |
Working Notes:
(1) Calculation of Stock:
Stock is always valued at 90% of cost
(A) Opening Stock = Rs.15,300 – (90%)
=15,300× 10/90
= 1,700 – (10%)
= 15,300 + 1,700 = 17,000
Opening Stock = Rs.17,000
(b) Closing Stock – Rs.13,500 – (90%)
13,500 ×10/90
= 1,500
13,500 + 1,500 = 15,000
Closing Stock = Rs.15,000.
(2) Calculation of Gross Profit Rate:
(Take the values of previous year i.e. Trading Account)
=
27,000/90,000 × 100
= 30%
Gross Profit Rate = 30%
(3) Statement of Claim:
Estimated stock on the date of fire = 36,000
Less: Stock saved = 9,000
Value of stock destroyed by fire = Rs.27,000
(4) Calculation of Average Clause:
(As there is policy value given so we have to calculate average clause)
Average Clause =
Value of stock on the date of fire |
31,500/ 36,000 × 27,000
= 23,625
Average Clause = Rs.23,625
Q6) A fire occurred on 15th December, 2011 in the premises of D Co. Ltd. From the following figures, calculate the amount of claim to be lodged with the insurance company for loss of stock:
Rs. Stock at cost as on 1st April, 2010 2,00,000 Stock at cost as on 1st April, 2012 3,00,000 Purchase for the year ended 31st March, 2011 4,00,000 Purchase from 1st April, 2011 to 15th December, 2011 8,80,000 Sales for the year ended 31st March, 2011 6,00,000 Sales from 1st April, 2011 to 15th December, 2011 10,50,000 During the accounting year 2011-2012, cost of purchase rose by 10% above the previous year’s levels while selling prices went up by 5% The value of stock salvaged was Rs. 20,000 |
A6)
Trading Account for the year ended 31st March, 2011
Dr. Cr.
To Stock as on 1st April, 2010 To Purchase To Gross Profit (balancing Figure) | Rs 2,00,000 4,00,000 3,00,000 |
By Sales By Stock as on 31st March, 2011 | Rs 6,00,000 3,00,000
|
9,00,000 | 9,00,000 |
Rate of gross profit = 3,00,000 / 6,00,000 × 100 = 50%
Memorandum Trading Account
for the period from 1st April, 2011 to 15th December, 2011
Dr. Cr.
Particulars | Actuals | At last year’s rates | Particulars | Actual | At last year’s rates |
To Stock as on 1st April, 2011 To Purchase To Gross Profit (at last year’s rates = Rs. 10,00,000 × 50/100) (Actual, balancing figure) | Rs 3,00,000 8,80,000
5,30,000 | Rs 3,00,000 8,00,000
5,00,000
|
By Sales By Stock on 15th Dec. 2011 (At last year’s rates -balancing figure) (Actual -on FIFO basis Rs.6,00,000 × 110 × 100) | Rs 10,50,000
6,60,000
| Rs 10,00,000
6,00,000
|
17,10,000 | 16,00,000 | 17,10,000 | 16,00,000 |
Rs.
Value of closing Stock on 31st December, 2011 at current rates 6,60,000
Less: Value of goods salvaged 20,000
Amount of the claim to be lodged 6,40,000
Q7) On 15th June 2015, the premises and stock of a firm was destroyed by fire but the accounting records were saved from which the following particulars are available:
Stock on 1.1.2014 73,500
Stock on 31.12.2014 81,900
Purchases for the year 2014 3,98,000
Sales for the year 2014 4,87,000
Purchases from 1.1.2015 to 15.6.2015 1,62,000
Sales from 1.1.2015 to 15.6.2015 2,31,200
The stock salvaged was 5,300. Show the amount of claim.
A7)
Step 1: Preparation of Last Year Trading Account
trading account for the year ending 31st dec 2014 | |||
particulars | amount | particulars | amount |
To opening stock | 73,500 | By sales | 487,000 |
To purchase | 398,000 | By closing stock | 81,900 |
To Gross profit | 97,400 |
|
|
| 568,900 |
| 568,900 |
Step 2: Calculation of Rate of Gross Profit on Sales
Rate of G/P = Net Sales/Gross Profit × 100 = 4,87,000/97,400 × 100 = 20%
Step 3: Preparation of Memorandum Trading Account
Memorandum trading account | |||
particulars | amount | particulars | amount |
To opening stock | 81,900 | By sales | 231,200 |
To purchase | 162,000 | By closing stock | 58,940 |
To Gross profit | 46,240 |
|
|
| 290,140 |
| 290,140 |
Step 4: Calculation of Actual Amount of Loss
particulars | amount |
Stock on the date of fire | 58940 |
less: salvaged stock | 5300 |
Actual amount of loss | 53640 |
Step 5: Calculation of Amount of Claim
The problem does not provide any information about the policy amount. Hence, the amount of claim will be the same as actual amount of loss.
The amount of claim = 53,640
Q8) A fire broke out in the warehouse of Merchantile Traders Ltd. on 30th Sep., 15. The company desires to file a claim with the insurance company for loss of stock. From the following information prepare a statement showing the amount of claim. The last account of company were prepared on 31.12.14.
Stock on 31.12.14 1,20,000
Sundry debtors on 31.12.14 3,20,000
Sundry debtors on 30.9.15 2,40,000
Cash received from debtors 11,52,000
Purchases from 1.1.15 to 30.9.15 10,00,000
Rate of Gross Profit on sales 25%
A8)
Total debtors account | |||
particulars | amount | particulars | amount |
To opening balance b/d | 320,000 | By cash received | 1,152,000 |
To credit sales | 1,072,000 | By closing balance c/d | 240,000 |
|
|
|
|
| 1,392,000 |
| 1,392,000 |
|
|
|
|
Memorandum trading account | |||
particulars | amount | particulars | amount |
To opening stock | 120,000 | By sales | 1,072,000 |
To purchase | 1,000,000 | By closing stock | 316,000 |
To Gross profit | 268,000 |
|
|
| 1,388,000 |
| 1,388,000 |
Statement of claim |
|
|
|
particulars | amount |
|
|
Closing stock | 316000 |
|
|
less: salvaged | - |
|
|
Amount of claim | 316000 |
|
|
Q9) Om Ltd. purchased a machine on hire purchase basis from Kumar Machinery Co. Ltd. on
the following terms:
You are required to calculate the total interest and interest included in cash instalment.
A9)
Calculation of interest
| Total (Rs.) | Interest in each instalment (1) | Cash price in each instalment (2) |
Cash Price Less: Down Payment Balance due after down payment Interest/Cash Price of 1st instalment
Less: Cash price of 1st instalment Balance due after 1st instalment Interest/cash price of 2nd instalment
Less: Cash price of 2nd instalment Balance due after 2nd instalment Interest/Cash price of 3rd instalment
Less: Cash price of 3rd instalment Balance due after 3rd instalment Interest/Cash price of 4th instalment
Less: Cash price of 4th instalment Balance due after 4th instalment Interest/Cash price of 5th instalment
Less: Cash price of 5th instalment Total | 80,000 (21,622) 58,378 -
(9,562) 48,816 -
(10,518) 38,298 -
(11,570) 26,728
-
(12,728) 14,000 -
(14,000) Nil |
Nil
Rs. 58,378 x10/100 = Rs. 5,838
Rs. 48,816 x 10/100 = Rs. 4,882
Rs. 38,298x10/100 = Rs. 3,830
Rs. 26,728 x10/100 = Rs. 2,672
Rs. 14,000 x10/100 =Rs. 1,400
Rs. 18,622 |
Rs. 21,622
Rs. 15,400 – Rs. 5,838 = Rs. 9,562
Rs. 15,400 - Rs. 4,882 = Rs. 10,518
Rs. 15,400 - Rs. 3,830 = Rs. 11,570
Rs. 15,400 - Rs. 2,672 = Rs. 12,728
Rs. 15400 – Rs. 1,400 = 14,000
Rs. 80,000 |
Total interest can also be calculated as follow:
(Down payment + instalments) – Cash Price = Rs. [21,622+(15400 x 5)] – Rs. 80,000 = Rs. 18,622
Q10) 1st January, 2000 Mr. A purchases from Mr. B machinery whose cash price is Rs. 15,000; Rs. 5,000 is to be paid down, that is on signing of the contract, and Rs. 4,000 is to be paid at the end of each year for 3 years. Rate of interest is 10% p.a. Prepare B’s account in the books of Mr. A
A10)
A’s Books
Dr. |
|
| B’s Account |
| Cr. |
|
| Rs. |
|
| Rs. |
2000 |
|
| 2000 |
|
|
Jan.1 | To Cash | 5,000 | Jan.1 | By Machinery A/c | 15,000 |
Dec.31 | To Cash | 4,000 | Dec.31 | By Interest A/c | 1,000 |
’’ | To balance c/d | 7,000 |
| (10% on Rs. 10,000) |
|
|
| 16,000 |
|
| 16,000 |
2001 |
|
| 2001 |
|
|
Dec.31 | To Cash | 4,000 | Jan.1 | By Balance b/d | 7,000 |
| To Balance c/d | 3,700 | Dec.31 | By Interest A/c |
|
|
|
|
| (10% on Rs. 7,000) | 700 |
|
| 7,700 |
|
| 7,700 |
2002 |
|
| 2002 |
|
|
Dec.31 | To Cash | 4,000 | Jan.1 | By Balance b/d | 3,700 |
|
|
| Dec.31 | By Interest A/c* | 300 |
|
| 4,000 |
|
| 4,000 |
