Page 253 - Accountancy_F5

Hire purchase interest payable per instalment is calculated as follows:

Digit Digit assigned/ Hire purchase interest per
Date
assigned Sum of digits instalment: TZS

31 December 3 3 3
st
2017 6 = 620 ,00 # 6 = 310 ,000
FOR ONLINE READING ONLY
31 December 2 2 2
st
2018 6 = 620 ,00 # 6 = 206 ,667

31 December 1 1 1
st
2019 6 = 620 ,000 # 6 = 103 ,333
LANGUAGE EDITING
Total 620,000

Exercise 8.3

(1) Gulioni Ltd. acquired a photocopy machine from Chapakazi Ltd. on 1 January
st
2020. The cash price was TZS 4,000,000 and the hire purchase price was TZS
4,500,000. The down payment of TZS 1,500,000 was paid followed by two annual
instalments of TZS 1,500,000 payable at the end of 31 December 2020 and 2021.
st
Hire purchase interest was 20 per cent per annum.
Required: Calculate the annual interest payable for the years ended 31 December
st
2020 and 2021 using the following method:
(a) Straight line method;
(b) Actuarial Method; and
(c) Sum of year digits.
(2) On 1 January 2022, Umoja Ltd. acquired an asset using hire purchasing on the
st
following terms:
Details TZS
Cash price 10,000,000
Down payment 4,000,000
Hire purchase price 12,000,000
Interest is 25% on outstanding balance
Four (4) annual instalments, each at 1,500,000

Required: Calculate the amount of interest to be included in each instalment using
the following method:
(a) Straight line method,
(b) Actuarial Method, and
(c) Sum of the year digits methods.

Student’s Book Form Five
240

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