Hire purchase

M/s Raj and Bros. purchased a motor car from Sanjaya Automobiles on 1st Jan. 2012 on the hire-purchase system. The cash price of the motor car was Rs. 11,170. Rs. 3,000 was to be paid on signing the agreement and the balance in the three annual installments of Rs. 3,000 each. Interest @ 5% p.a. is charged by the vendor. The purchaser had decided to write off 10% depreciation annually on the written down value method. The purchaser could not pay off the installment due on 31st Dec., 2013 and as a result of this, the vendor took possession of the motor-car and the vendor estimated its value Rs. 5,500 and spent Rs. 400 on it. Later on, this motor-car was sold for Rs. 6,400. Prepare necessary accounts in the books of both the parties.

asked Apr 6, 2016 in General by Annet (31 points) 129 views

1 Answer

0 votes

 

In case of any doubt, please don't hesitate to discuss further.

answered Apr 9, 2016 by jbsclasses (3,805 points)
repossession value should be same for both parties
See the vendor is valuing the motor car  in his books at Rs.5500.  At the same time the motor car appears in the books of buyer at Rs.9048 and he owes the vendor only Rs.5858.  The buyer has to part with the motor car that is why he incurs a loss of Rs.3190 (Rs.9048-Rs.5858).  So the value of goods repossessed cannot be same in the books of buyer and the vendor.  The value of goods repossessed can be same for both the parties if goods are partially repossessed.  For example in a case where there were two cars and on failure to pay instalment the vendor takes one car leaving the other car with the buyer and the buyer keeps paying instalments for one car.  In such a case both the parties have to decide on one value on which the vendor is taking away one car so that both the parties know what is balance amount which buyer owes to the vendor.
not agree, i request to check it once again
...