On 31 March 20X4, D Biggs, who prepares his financial statements to 31 March, bought a lorry on hire purchase from Truck Fleet Ltd. The cash price of the lorry was £61,620. Under the terms of the hire purchase agreement, Biggs paid a deposit of £20,000 on 31 March 20X4, and two instalments of £23,981 on 31 March 20X5 and 20X6. The hire vendor charged interest at 10 per cent per annum on the balance outstanding on 1 April each year. All payments were made on the due dates. Biggs maintained the motor lorry account at cost and accumulated the annual provision for depreciation, at 40 per cent on the reducing balance method, in a separate account. A full year’s depreciation is charged in the year of purchase, irrespective of the date acquired.

Required:

(a) Prepare the following accounts as they would appear in the ledger of D Biggs for the period of the contract:

(i) Truck Fleet Ltd

(ii) Motor lorry on hire purchase

(iii) Provision for depreciation of motor lorry

(iv) Hire purchase interest payable

(b) Show how the above matters would appear in the balance sheet of D Biggs at 31 March 20X5.

Truck Fleet Ltd prepares its financial statements to 31 March, on which date it charges D Biggs with the interest due.

Make calculations to the nearest £.