Dundas Limited purchased a machine under a hire purchase agreement on 1 January 2015. The agreement provided for an immediate payment of £2,000, followed by five equal instalments of £3,056, each instalment to be paid on 30 June and 31 December respectively.
The cash price of the machine was £10,000. Dundas estimated that it would have a useful economic life of five years, and its residual value would then be £1,000.
In apportioning interest to respective accounting periods, the company uses the ‘sum of digits’Author’s note method.

Required:
(a) Write up the following ledger accounts for each of the three years to 31 December 2015, 2016 and 2017 respectively:
(i) Machine hire purchase loan account; and
(ii) Machine hire purchase interest account.
(b) Show the following statement of financial position extracts relating to the machine as at 31 December 2015, 2016 and 2017 respectively:
(i) Non-current assets: machine at net book value;
(ii) Current liabilities: accounts payable – obligation under hire purchase contract; and
(iii) Non-current liabilities: accounts payable – obligation under hire purchase contract.