Accounting

PROBLEM NO 5: Abhiram Limited is a non-banking finance company. It accepts public deposit and also deals in hire purchase business of trucks. As on 31-03-2016 Few Trucks were sold on hire purchase basis. The hire purchase price was set as Rs.400 lakhs as against the cash price of Rs.350 lakhs. The amount was payable as Rs.50 lakhs down payment and balance in 5 equal installments. The hire vendor collected first installment as on 31-03-2017, but could not collect the second installment which was due on 31-03-2018. Till 15-05-2018, the date on which the Board of Directors signed the accounts, the second installment was not collected. Presume IRR to be 5.4%. Depreciation is to be charged at 20% per annum. You are required to answer the following: i) What should be the principal outstanding on 1-4-2017? Should the company recognize finance charge for the year 2017 - 2018 as income