A printing company purchased a machine on hire purchase over a period of three years, paying

£1,308 on 1 January 2006, and further annual payments of £4,000 due on 31 December 2006, 2007 and 2008.

The cash price of the machine was £12,000, the vendor company charging interest at 6% 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 2006; depreciation at 20% per annum straight line is to be charged and interest calculated to the nearest £.