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On 1st April, 2011, the Mumbai Automobiles Company purchased a machine on the hire-purchase system for ₹ 25,500, combining principal and interest payable by three equal annual instalments. The machine manufacturer charges interest at the rate of 5% per annum. Show the accounts in the books of the buyer depreciating the machine at 10% on the diminishing balances yearly. The accounting year ends on 31st March.?
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On 1st April, 2011, the Mumbai Automobiles Company purchased a machine...
Machine Purchase and Hire-Purchase Details
On 1st April 2011, Mumbai Automobiles Company acquired a machine for ₹ 25,500 through a hire-purchase system. The total amount includes principal and interest at a rate of 5% per annum, payable in three equal instalments.
Annual Instalment Calculation
To calculate the annual instalment, we can use the formula for an annuity:
\[
\text{Instalment} = \frac{P \times r(1+r)^n}{(1+r)^n - 1}
\]
Where:
- \( P = 25,500 \) (Principal)
- \( r = 0.05 \) (Interest Rate)
- \( n = 3 \) (Number of Instalments)
Using this formula, the annual instalment comes out to be approximately ₹ 9,086.
Depreciation Calculation
The machine is depreciated at 10% on a diminishing balance basis:
1. Year 1 (2011-12):
- Opening Balance: ₹ 25,500
- Depreciation: \( 25,500 \times 10\% = ₹ 2,550 \)
- Closing Balance: \( 25,500 - 2,550 = ₹ 22,950 \)
2. Year 2 (2012-13):
- Opening Balance: ₹ 22,950
- Depreciation: \( 22,950 \times 10\% = ₹ 2,295 \)
- Closing Balance: \( 22,950 - 2,295 = ₹ 20,655 \)
3. Year 3 (2013-14):
- Opening Balance: ₹ 20,655
- Depreciation: \( 20,655 \times 10\% = ₹ 2,065.50 \)
- Closing Balance: \( 20,655 - 2,065.50 = ₹ 18,589.50 \)
Accounts in the Books
The entries in the books will include:
- Machine Account: Records the cost of the machine and depreciation.
- Hire-Purchase Account: Records the liability and payment of instalments.
- Depreciation Account: Captures annual depreciation expense.
Conclusion
This structured accounting approach ensures accurate tracking of the machine's value and the financial obligations of Mumbai Automobiles Company.
On 1st April 2011, Mumbai Automobiles Company acquired a machine for ₹ 25,500 through a hire-purchase system. The total amount includes principal and interest at a rate of 5% per annum, payable in three equal instalments.
Annual Instalment Calculation
To calculate the annual instalment, we can use the formula for an annuity:
\[
\text{Instalment} = \frac{P \times r(1+r)^n}{(1+r)^n - 1}
\]
Where:
- \( P = 25,500 \) (Principal)
- \( r = 0.05 \) (Interest Rate)
- \( n = 3 \) (Number of Instalments)
Using this formula, the annual instalment comes out to be approximately ₹ 9,086.
Depreciation Calculation
The machine is depreciated at 10% on a diminishing balance basis:
1. Year 1 (2011-12):
- Opening Balance: ₹ 25,500
- Depreciation: \( 25,500 \times 10\% = ₹ 2,550 \)
- Closing Balance: \( 25,500 - 2,550 = ₹ 22,950 \)
2. Year 2 (2012-13):
- Opening Balance: ₹ 22,950
- Depreciation: \( 22,950 \times 10\% = ₹ 2,295 \)
- Closing Balance: \( 22,950 - 2,295 = ₹ 20,655 \)
3. Year 3 (2013-14):
- Opening Balance: ₹ 20,655
- Depreciation: \( 20,655 \times 10\% = ₹ 2,065.50 \)
- Closing Balance: \( 20,655 - 2,065.50 = ₹ 18,589.50 \)
Accounts in the Books
The entries in the books will include:
- Machine Account: Records the cost of the machine and depreciation.
- Hire-Purchase Account: Records the liability and payment of instalments.
- Depreciation Account: Captures annual depreciation expense.
Conclusion
This structured accounting approach ensures accurate tracking of the machine's value and the financial obligations of Mumbai Automobiles Company.
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On 1st April, 2011, the Mumbai Automobiles Company purchased a machine on the hire-purchase system for ₹ 25,500, combining principal and interest payable by three equal annual instalments. The machine manufacturer charges interest at the rate of 5% per annum. Show the accounts in the books of the buyer depreciating the machine at 10% on the diminishing balances yearly. The accounting year ends on 31st March.?
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On 1st April, 2011, the Mumbai Automobiles Company purchased a machine on the hire-purchase system for ₹ 25,500, combining principal and interest payable by three equal annual instalments. The machine manufacturer charges interest at the rate of 5% per annum. Show the accounts in the books of the buyer depreciating the machine at 10% on the diminishing balances yearly. The accounting year ends on 31st March.? 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, 2011, the Mumbai Automobiles Company purchased a machine on the hire-purchase system for ₹ 25,500, combining principal and interest payable by three equal annual instalments. The machine manufacturer charges interest at the rate of 5% per annum. Show the accounts in the books of the buyer depreciating the machine at 10% on the diminishing balances yearly. The accounting year ends on 31st March.? covers all topics & solutions for UPSC 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for On 1st April, 2011, the Mumbai Automobiles Company purchased a machine on the hire-purchase system for ₹ 25,500, combining principal and interest payable by three equal annual instalments. The machine manufacturer charges interest at the rate of 5% per annum. Show the accounts in the books of the buyer depreciating the machine at 10% on the diminishing balances yearly. The accounting year ends on 31st March.?.
On 1st April, 2011, the Mumbai Automobiles Company purchased a machine on the hire-purchase system for ₹ 25,500, combining principal and interest payable by three equal annual instalments. The machine manufacturer charges interest at the rate of 5% per annum. Show the accounts in the books of the buyer depreciating the machine at 10% on the diminishing balances yearly. The accounting year ends on 31st March.? 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, 2011, the Mumbai Automobiles Company purchased a machine on the hire-purchase system for ₹ 25,500, combining principal and interest payable by three equal annual instalments. The machine manufacturer charges interest at the rate of 5% per annum. Show the accounts in the books of the buyer depreciating the machine at 10% on the diminishing balances yearly. The accounting year ends on 31st March.? covers all topics & solutions for UPSC 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for On 1st April, 2011, the Mumbai Automobiles Company purchased a machine on the hire-purchase system for ₹ 25,500, combining principal and interest payable by three equal annual instalments. The machine manufacturer charges interest at the rate of 5% per annum. Show the accounts in the books of the buyer depreciating the machine at 10% on the diminishing balances yearly. The accounting year ends on 31st March.?.
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