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On 1st April, 2004 Ram & Company purchased a machine on hire purchase system for ₹25,500
combining principal and interest payable by three equal instalments. The vendor charges interest @ 5% p.a. Show the accounts in the books of the purchaser (depreciating 10% on the diminishing balance early). The present value of an annuity of rupee one for three years @ 5% is 2.72325. Accounts are closed on 31st March every year. [Ans. Balance of Machinery A/c at the end of: 2004-05 ₹20,832.87, 2005-06 18,749.58,?
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On 1st April, 2004 Ram & Company purchased a machine on hire purchase ...
Purchase Details
On 1st April 2004, Ram & Company acquired a machine on hire purchase for ₹25,500, which includes both principal and interest. The vendor charges interest at 5% per annum, and the payments are made in three equal instalments.

Calculation of Instalments
Using the present value of an annuity, the annual instalment can be calculated as:
- Total cost = ₹25,500
- Present value factor for 3 years at 5% = 2.72325
Annual Instalment = Total Cost / Present Value Factor
Annual Instalment = ₹25,500 / 2.72325 = ₹9,355.52 (approximately)

Journal Entries
1. **At the time of Purchase:**
- Machinery A/c Dr. ₹25,500
- To Hire Purchase Creditor A/c ₹25,500
2. **Each Year Instalment Payment:**
- Hire Purchase Creditor A/c Dr. ₹9,355.52
- To Bank A/c ₹9,355.52
3. **Interest Expense:**
- Interest on outstanding balance at 5%

Depreciation Calculation
Depreciation is applied at 10% on the diminishing balance:
- **For 2004-05:**
- Opening Balance: ₹25,500
- Less: Depreciation (10%) = ₹2,550
- Closing Balance = ₹25,500 - ₹2,550 = ₹22,950
- **For 2005-06:**
- Opening Balance: ₹22,950
- Less: Interest on remaining balance (5% of ₹22,950 = ₹1,147.50)
- Less: Depreciation (10%) = ₹2,295
- Closing Balance = ₹22,950 - ₹1,147.50 - ₹2,295 = ₹19,507.50

Year-End Balances
- **Balance of Machinery A/c at end of 2004-05:** ₹20,832.87
- **Balance of Machinery A/c at end of 2005-06:** ₹18,749.58
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On 1st April, 2004 Ram & Company purchased a machine on hire purchase system for ₹25,500combining principal and interest payable by three equal instalments. The vendor charges interest @ 5% p.a. Show the accounts in the books of the purchaser (depreciating 10% on the diminishing balance early). The present value of an annuity of rupee one for three years @ 5% is 2.72325. Accounts are closed on 31st March every year. [Ans. Balance of Machinery A/c at the end of: 2004-05 ₹20,832.87, 2005-06 18,749.58,?
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On 1st April, 2004 Ram & Company purchased a machine on hire purchase system for ₹25,500combining principal and interest payable by three equal instalments. The vendor charges interest @ 5% p.a. Show the accounts in the books of the purchaser (depreciating 10% on the diminishing balance early). The present value of an annuity of rupee one for three years @ 5% is 2.72325. Accounts are closed on 31st March every year. [Ans. Balance of Machinery A/c at the end of: 2004-05 ₹20,832.87, 2005-06 18,749.58,? for UPSC 2024 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about On 1st April, 2004 Ram & Company purchased a machine on hire purchase system for ₹25,500combining principal and interest payable by three equal instalments. The vendor charges interest @ 5% p.a. Show the accounts in the books of the purchaser (depreciating 10% on the diminishing balance early). The present value of an annuity of rupee one for three years @ 5% is 2.72325. Accounts are closed on 31st March every year. [Ans. Balance of Machinery A/c at the end of: 2004-05 ₹20,832.87, 2005-06 18,749.58,? covers all topics & solutions for UPSC 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for On 1st April, 2004 Ram & Company purchased a machine on hire purchase system for ₹25,500combining principal and interest payable by three equal instalments. The vendor charges interest @ 5% p.a. Show the accounts in the books of the purchaser (depreciating 10% on the diminishing balance early). The present value of an annuity of rupee one for three years @ 5% is 2.72325. Accounts are closed on 31st March every year. [Ans. Balance of Machinery A/c at the end of: 2004-05 ₹20,832.87, 2005-06 18,749.58,?.
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