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Question One A Build Ltd sold a property to Hotel Chain under a hire purchase agreement on 1 January 2006. Under the agreement, Hotel
Question One A Build Ltd sold a property to Hotel Chain under a hire purchase agreement on 1 January 2006. Under the agreement, Hotel Chain was to pay 20% of the cash price as deposit upon handing over and the remainder was to be paid in six instalments on 31" December of each year. The true rate of interest on the outstanding balance was 10%. The cash price component of each instalment was agreed at GHS130,000.00, GHS100,000.00, GHS 80,000.00, GHS60,000.00, GHS40,000 and GHS30,000.00 for 2006, 2007, 2008, 2009, 2010 and 2011 respectively. Build Ltd built the warehouse at the cost of GHS440,000.00. Required Determine the cash price of the agreement,(assume a cash price of GHS555,000 for a penalty of 4 marks) L ii. Calculate the margin, Hi. iv. Determine the annual instalments V. Determine the HP interests Determine the provision for unrealized profit at the end of each year. (10 marks) B SpaceBuild sold an aircraft under hire purchase agreement to Budget Air. The cash price is GHS600,000 and the deposit upon delivery on 1 January 2015 is GHS150,000. SpaceBuild manufactured the aircraft at a cost of GHS450,000. You are provided the following additional data. Required Terms in agreement Year Instalment HP Interest 2015 2016 GHS 195 GHS Provision for unrealised profit GHS 45 60 150 30 36 In the books of Budget Air, record the transactions in SpaceBuild Account- b. Hire Purchase Interest Payable Account, and in the books of SpaceBuild shows c. Provision for Unrealised Profit Accounts d. Hire Purchase Trading Account for 2015. (Budget Air does not keep the HP Interest Payable Suspense Account), (10 marks) Page 1 of 4
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