Interest Calculations – NBC Institute

FA – Nov 2011 – L1 – SA – Q19 – Hire Purchase and Consumer Credit Transactions

This question asks about the interest payable in the first year on a hire purchase agreement.

Question

A car with a cash price of N750,000 was acquired on hire purchase on 1 January 2010. The agreement required an initial deposit of N150,000 and three equal yearly installments payable effective 31 December 2010. Interest of 15% is payable on the balance outstanding at the end of each year. How much interest is payable at the end of first year?
A. N22,500
B. N45,000
C. N90,000
D. N112,500
E. N135,000

Answer

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Tags: Hire Purchase, Interest Calculations
Level: Level 1

Topic: Hire Purchase and Consumer Credit Transactions
Series: NOV 2011

FR – May 2019 – L2 – Q5b – Financial Reporting Standards and Their Applications

Calculation of accounting entries for machinery purchased under hire purchase and repossessed.

Question

Lease and hire purchase are very popular options for financing assets. These options vary from each other in many aspects: ownership of the asset, depreciation, rental payments, duration, tax impact, repairs and maintenance of the asset, and the extent of finance.

Thereatta Ltd is a listed advertising company operating in Ghana. The Board of Thereatta Ltd (Thereatta) was contemplating the most suitable option to finance one of its machinery before settling on Hire Purchase. On 1 January 2016, Thereatta acquired a machinery on hire-purchase basis from Askona Ltd agency. The terms of the Hire Purchase agreement require Thereatta to make four annual installments of GH¢6,000 each, payable at the end of each year. There is no down payment. Interest is charged at 20% per annum and is included in the annual installments.

Because of financial difficulties, Thereatta, after having paid the first and second installments respectively, could not pay the third yearly installment due on 31 December 2018, whereas the vendor repossessed the machinery. Thereatta provides depreciation on the machinery at 10% per annum according to the written-down value method.

Required:

Show the accounting treatment of the Machinery account and the account of Askona Ltd agency in the books of Thereatta. (All workings must be shown).

Answer

Find Related Questions by Tags, levels, etc.

Tags: Depreciation, Hire Purchase, Interest Calculations, Repossession
Level: Level 2

Topic: Financial Reporting Standards and Their Applications
Series: MAY 2019

FA – Nov 2011 – L1 – SA – Q19 – Hire Purchase and Consumer Credit Transactions

This question asks about the interest payable in the first year on a hire purchase agreement.

Question

Answer

Find Related Questions by Tags, levels, etc.

Tags: Hire Purchase, Interest Calculations
Level: Level 1

Topic: Hire Purchase and Consumer Credit Transactions
Series: NOV 2011

FR – May 2019 – L2 – Q5b – Financial Reporting Standards and Their Applications

Calculation of accounting entries for machinery purchased under hire purchase and repossessed.

Question

Required:

Show the accounting treatment of the Machinery account and the account of Askona Ltd agency in the books of Thereatta. (All workings must be shown).

Answer

Find Related Questions by Tags, levels, etc.

Tags: Depreciation, Hire Purchase, Interest Calculations, Repossession
Level: Level 2

Topic: Financial Reporting Standards and Their Applications
Series: MAY 2019

Question Tag: Interest Calculations

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FA – Nov 2011 – L1 – SA – Q19 – Hire Purchase and Consumer Credit Transactions

This question asks about the interest payable in the first year on a hire purchase agreement.

FR – May 2019 – L2 – Q5b – Financial Reporting Standards and Their Applications

Calculation of accounting entries for machinery purchased under hire purchase and repossessed.

FA – Nov 2011 – L1 – SA – Q19 – Hire Purchase and Consumer Credit Transactions

This question asks about the interest payable in the first year on a hire purchase agreement.

FR – May 2019 – L2 – Q5b – Financial Reporting Standards and Their Applications

Calculation of accounting entries for machinery purchased under hire purchase and repossessed.

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FA – Nov 2011 – L1 – SA – Q19 – Hire Purchase and Consumer Credit Transactions

This question asks about the interest payable in the first year on a hire purchase agreement.

You're reporting an error for "FA – Nov 2011 – L1 – SA – Q19 – Hire Purchase and Consumer Credit Transactions"

FR – May 2019 – L2 – Q5b – Financial Reporting Standards and Their Applications

Calculation of accounting entries for machinery purchased under hire purchase and repossessed.

You're reporting an error for "FR – May 2019 – L2 – Q5b – Financial Reporting Standards and Their Applications"

FA – Nov 2011 – L1 – SA – Q19 – Hire Purchase and Consumer Credit Transactions

This question asks about the interest payable in the first year on a hire purchase agreement.

You're reporting an error for "FA – Nov 2011 – L1 – SA – Q19 – Hire Purchase and Consumer Credit Transactions"

FR – May 2019 – L2 – Q5b – Financial Reporting Standards and Their Applications

Calculation of accounting entries for machinery purchased under hire purchase and repossessed.

You're reporting an error for "FR – May 2019 – L2 – Q5b – Financial Reporting Standards and Their Applications"

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