A printing company purchased a machine on hire purchase over a period of three years, paying £1,308 on 1 January 20X6, and further annual payments of £4,000 due on 31 December 20X6, 20X7 and 20X8.

The cash price of the machine was £12,000, the vendor company charging interest at 6 per cent per annum on outstanding balances.

Show the appropriate ledger accounts in the purchaser’s books for the three years and how the items would appear in the balance sheet at 31 December 20X6; depreciation at 20 per cent per annum straight-line is to be charged and interest calculated to the nearest £.