1. SCHOOL OF ACCOUNTANCY
COLLEGE OF BUSINESS
BKAF3063 FINANCIAL ACCOUNTING AND REPORTING III
TUTORIAL 2: ACCOUNTING FOR HIRE PURCHASE
Due date: 28 September 2014
QUESTION 1
Perdana Sdn Bhd sells electrical appliances on cash basis since the year of 1995. However,
the company involves in both hire purchase sales and cash sales in the year 2005 onwards.
The latest hire purchase sales were done between Perdana Sdn Bhd and newly married
couple, Mr. Munir and Mrs. Murni on 1 September 2012. The couple paid RM4,012 as a
deposit for a set of electrical appliances which comprise refrigerator, washing machine and
television. The cash price of the electrical appliances on that date was RM11,800 and the cost
was RM7,680. The hire purchase period was 12 months with monthly installment of RM708
due at the end of each month starting 30 September 2012. The interest rate charged by
Perdana Sdn Bhd is 6%. The financial year end for Perdana Sdn Bhd is 31 December,
adopting the sum of year digits for the monthly interest recognition and immediate
recognition method for the gross profit amounts.
Required:
(Round up the figures to two decimal places)
(a) Determine the hire purchase price and total interest that Mr. Munir and Mrs. Murni
had incurred in order to buy the electrical appliances.
(b) Prepare the journal entries for Perdana Sdn Bhd on 1 September 2012 and 31
December 2012 using the sales method.
(c) Prepare a partial statement of comprehensive income and statement of financial
position related to hire purchase sales for Perdana Sdn Bhd as at 31 December 2012.
(d) Assuming that Mr. Munir and Mrs. Murni failed to pay the installments for January
and February 2013. They had received a notice of intention of repossession from
Perdana Sdn. Bhd. during March 2013. The couple opted that the company
repossessed the electrical appliances on 1 April 2013. The price of all the electrical
appliances bought by them on the repossession date was RM5,619.85 and the
repossession cost was RM120.
(i) Calculate the statutory rebates that couple entitled from Perdana Sdn Bhd.
(ii) Calculate the amount to be paid to or received from the couple on the repossession
date.
2. QUESTION 2
Kelangit Sdn Bhd bought an automatic bottling machine from Mentari Sdn Bhd on hire
purchase agreement. The cash price of the machine was RM65,200 and the useful life of the
machine was 5 years. The agreement was signed for 2 years starting from 1 February 2012 to
31 January 2014. The information related to the hire purchase is as follows:
Deposit 15% of the cash price
Instalment RM2,517 per month (paid every end of the month starting on 28 February 2012)
The cost of the machine was RM51,350. Both companies closed their accounts on every 30
June. Kelangit Sdn Bhd recorded the hire purchase using gross method while Mentari Sdn
Bhd used sales method and recognised the gross profit based on collection. Both companies
employed the sum-of-the-years digits method to recognise the interest expense/income on the
instalment payment date. Kelangit Sdn Bhd used the straight line method to depreciate all its
non-current assets.
REQUIRED:
(Round your answer to the nearest RM)
(a) Calculate the amount of the hire purchase price and the total interest.
(b) Prepare the journal entries for Kelangit Sdn Bhd on 1 February 2012 and 28 February
2012.
(c) Prepare a partial statement of financial position related to the hire purchase for
Kelangit Sdn Bhd for the year 2012.
(d) Calculate the gross margin to be realised by Mentari Sdn Bhd related to the hire
purchase on 30 June 2012.
(e) Assume that Kelangit Sdn Bhd failed to pay the instalments for July and August 2013.
On 7 September 2013, Kelangit Sdn Bhd received a notice of intention to repossess
from Mentari Sdn Bhd. On 1 October 2013, Mentari Sdn Bhd repossessed the
machine with a cost of RM230. The storage cost was RM180. Based on the latest
market information, the best price of the machine on the repossession date was
RM19,163. Calculate the amount to be paid to or received from Kelangit Sdn Bhd on
the repossession date.
(f) State TWO (2) situations that give right to Mentari Sdn Bhd to repossess the machine
as stipulated in Hire Purchase Act 1967.
