Royalty and Hire Purchase - Step by step approach of Practicals.. (Part-1)

Royalty and Hire Purchase

Study Mat (Dec'09) pg no. 144 Illustrn.5 Partial repossession 

Solution: (100000x7-20% cash, 5 half yearly rest, deprecialation 20%

In the books of Hire-purchase - Trucks A/c and Hire Vendors A/c

Dr- Hire Vendor's:700000   # Truck A/c # Depreciation:140000,. Hire Vendor (on repossession):81000, PL A/c:159000, Balance c/d:320000-Cr

Dr-Bank: 40000, 126000,Truck(on repossession):81000, Balance c/d: 378200 # Hire Vendors A/c # Truck: 700000, Interest: 14000, 11200-Cr

Calculation of Loss:
Value of truck in Hire-purchaser's book, 3 x 100000 - 20% depreciation = 240000
Value credited by HP vendor while repossession, [(140000 + 112000) x 3/7] - 25% as agreed = 81000
Loss shown in Truck A/c of Hire- purchaser = 240000 - 81000 = 159000    

In the books of Hire-vendor - Hire-purchaser A/c and Goods repossessed A/c 
       
Dr- HP Sales:700000, Interest:14000, 11200  # Hire-purchaser A/c #  - Bank:140000, 126000, Goods repossessed: 81000, balance:c/d 378000-Cr

Dr-Hire-purchaser:81000, Cash (expenses-2000)  # Goods repossessed A/c #  Bank (re-sale:80000), PL A/c:3000- Cr
================================================

Solution: Case (c)
Note: This is a question on Debtor System (Just like Branch Accounting)
Ist step:
Dr-Balance b/d (HP Stock:9000, HP Debtors:5000), Goods sold on HP: ***, HP Stock Reserve***, PL A/c*** # HP Trading A/c # Stock Reserve:3000, Bank:60000, Goods Sold on HP:***, Goods repossessed A/c: 500, Balance c/d  (HP Stock: ***, HP Debtors:9000)-Cr

Dr- Balance b/d:18000, Purchase:60000 # Shop Stock A/c # Goods Sold on HP (balancing figure): 58000, Balance c/d: 20000 -Cr ...........  ............ [Total-78000]

Dr- Balance b/d: 5000, HP Stock (balancing figure): 65400 # HP Debtors A/c # Bank: 60000, Goods repossessed A/c: 1400, Balance c/d: 9000 -Cr ..................... [Total- 70400]

Dr- Balance b/d: 9000, Goods Sod on HP: (58000 X 1.5 =) 87000 # HP Stock A/c # HP Debtors: 65400, Goods repossessed: 600, Balance c/d: 30000 -Cr ................. .............. [Total- 96000]

IInd Step:
Dr-Balance b/d (HP Stock:9000, HP Debtors:5000), Goods sold on HP: (58000 X 1.5 =) 87000  HP Stock Reserve:10000, PL A/c (balancing figure): 20500 # HP Trading A/c # Stock Reserve:3000, Bank:60000, Goods Sold on HP:29000, Goods repossessed A/c: 500, Balance c/d  ( HP Stock: 30000, HP Debtors: 9000 ) -Cr ...... ................. . [Total - 131500]

                              Ans, 684333