Hire Purchases - Exercise 4

Before Doing your exercise you may want to watch this video to recap on what is Depreciation.



Hire Purchases - Exercise 4



On 1 July 2010, Fred Trading agreed to purchase a machine from Kelvin Auto Ltd. The cash price was RM 27,000. Fred decided to purchase under hire purchase. The agreement states that Fred will pay a deposit of RM 4,500 on 1 July 2010, and two annual instalments of RM 9,370 on 30 June 2011, 2012 and a final instalment of RM 9,363 on 30 June 2013.

Interest is to be calculated at 12% on the balance outstanding immediately before the due date of each instalment. Fred paid the instalments by cheque as they became due. Depreciation on the machine is 10% on reducing balance method. The financial year ends on 30 June. ( All calculations were to be made to the nearest RM)

Required :
Prepare the following accounts up to 30 June 2013

a) Machinery 

b) Kelvin Auto Ltd

c) Hire Purchase Interest Account
d) Accumulated Depreciation - Machinery