Page 250 - Accountancy_F5

Example 8.2
On 1 January, 2023 Matumla Enterprises acquired a gymnastic equipment from
st
Naima Sports & Supplies Ltd. on hire purchase under the following terms:

Details TZS
Cash price 18,000,000
FOR ONLINE READING ONLY
Down payment 2,000,000
Hire purchase price 22,400,000
Rate of interest is 10%
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Number of annual instalments is four (4)
Required: Calculate the amount of interest to be included in each instalment.
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Solution 8.2
Amount per instalment TZS

Hire purchase price 22,400,000
Less: Down payment 2,000,000

Total instalments 20,400,000
Number of instalments 4
Amount per instalment 5,100,000

Hire purchase interest TZS
Hire purchase price 22,400,000

Less: Cash price 18,000,000
Hire purchase interest 4,400,000

Hire Purchase (HP) interest per instalment = Cash price outstanding × rate of interest
On 1 January 2016: Cash price – Down payment = Interest
st
Analysis of instalments in TZS:
Date Cash Price Principal Interest Total Closing
outstanding TZS TZS instalment balance
TZS TZS TZS
01 Jan. 2023 18,000,000 2,000,000 - - 16,000,000
st
31 Dec. 2024 16,000,000 3,500,000 1,600,000 5,100,000 12,500,000
st
31 Dec. 2025 12,500,000 3,850,000 1,250,000 5,100,000 8,650,000
st
31 Dec. 2026 8,650,000 4,235,000 865,000 5,100,000 4,415,000
st
31 Dec. 2027 4,415,000 4,415,000 685,000* 5,100,000 -
st
TOTAL 18,000,000 4,400,000 20,400,000

Student’s Book Form Five
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