Dundas Limited purchased a machine under a hire purchase agreement on 1 January 2011. 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 ${ }^{\prime A u t h o r s ' ~ n o t e ~}$ method.

Required:

(a) Write up the following ledger accounts for each of the three years to 31 December 2011, 2012 and 2013 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 2011, 2012 and 2013 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.