Msafiri Limited purchased 3 trucks from Kopesha Motors on 2nd January 2015 at a cost of Sh.1.5 million each on hire purchase system. Payment was to be made as Sh.900,000 down payment on the three Trucks and the remainder in three equal annual instalments payable at the end of each year at an interest rate of 9%. Msafiri Limited depreciated motor vehicles at 20% on a reducing balance method. It paid the instalment due at the end of 2015 but could not pay for the following year. Kopesha Motors agreed to leave one truck with the purchaser, adjusting the value of the other 2 trucks against the amount due. The trucks were valued on the basis of 30% depreciation annually. The repossessed trucks were reconditioned at an expense of Sh.225,000 and were sold for Sh.1,800,000 in the third year.

Required:

Show the necessary accounts in the books of:

i)        Msafiri Limited for 2 years                                                                            

ii)        Kopesha Motors for 3 yearsa)

Answer rating: 100% (QA)

ANSWER i Accounts in the books of Msafiri Limited for 2 years Year 2015 Trucks Account Date Description Debit Jan 2 Trucks Purchased 4500000 Bank Hire ... View the full answer