On Jan 1, 2009 Mr. Patel purchased from Vivek a machine on hire-purchase basis. The hire-purchase price was Rs 4,00,000 payable as to Rs 1,00,000 as down payment and three annual installments of Rs 1,00,000 each; the first annual installment being payable on Dec 31, 2009. Vivek charged interest @ 5% p.a.
Patel charged depreciation on the machine @ 15% p.a. on diminishing balances of the machine. He closes his books of account every year on 31 Mar.
Calculate the cash price of the machine. Also prepare for the three accounting years in Patel’s ledger the following accounts.
(a) The account of Vivek – the hire vendor, (b) Machinery Account, (c) Interest Account and (d) Depreciation Account.