HIRE PURCHASE

Scott Sdn Bhd sold a van to Premium Enterprise on a hire purchase over a period of four years. The cost price of the van is RM80,000. Both parties have signed an agreement on 1 July 2011 and the amount of deposit paid is RM22,500. The cash price of the van is 15% above its cost. The balance of payment will be settled in the period of agreement. The payment is made up of eight (8) half yearly installments. The first seven installments are to be made up of RM14,000 each and the final settlement of RM13,500. The first installment is due on 31 December 2011. The interest rate is 8% per annum and it is apportioned using reducing balance method. On 31 March 2013, the van was involved in an accident and totally damaged. Premium Enterprise decided to terminate the hire purchase agreement. Due to the accident, the buyer received a compensation amount RM40,000 from the insurance company. The final payment before termination is RM30,000. Premium Enterprise closes its book on 30 June every year and depreciation on van is to be provided at 20% per annum on carrying value, monthly basis. You are required to: Show the allocation of interest from December 2011 up to June 2013 (4 marks) b. In the books of Premium Enterprise, prepare the following accounts for the year ended 2012 and 2013: a. i. Van account ii . HP Creditor account - Scott Sdn Bhd iii. Hire purchase interest payable account iv. Accumulated for depreciation - van account V. Disposal account (16 marks) (Note: Computation to the nearest RM) c. State any TWO reasons for pre mature termination of the hire purchase agreement. (2 marks) Scott Sdn Bhd sold a van to Premium Enterprise on a hire purchase over a period of four years. The cost price of the van is RM80,000. Both parties have signed an agreement on 1 July 2011 and the amount of deposit paid is RM22,500. The cash price of the van is 15% above its cost. The balance of payment will be settled in the period of agreement. The payment is made up of eight (8) half yearly installments. The first seven installments are to be made up of RM14,000 each and the final settlement of RM13,500. The first installment is due on 31 December 2011. The interest rate is 8% per annum and it is apportioned using reducing balance method. On 31 March 2013, the van was involved in an accident and totally damaged. Premium Enterprise decided to terminate the hire purchase agreement. Due to the accident, the buyer received a compensation amount RM40,000 from the insurance company. The final payment before termination is RM30,000. Premium Enterprise closes its book on 30 June every year and depreciation on van is to be provided at 20% per annum on carrying value, monthly basis. You are required to: Show the allocation of interest from December 2011 up to June 2013 (4 marks) b. In the books of Premium Enterprise, prepare the following accounts for the year ended 2012 and 2013: a. i. Van account ii . HP Creditor account - Scott Sdn Bhd iii. Hire purchase interest payable account iv. Accumulated for depreciation - van account V. Disposal account (16 marks) (Note: Computation to the nearest RM) c. State any TWO reasons for pre mature termination of the hire purchase agreement. (2 marks)