Home appliances Ltd. Sells goods on hire purchase terms at a profit of 25% on hire purchase price.

Get the full solved assignment PDF of BCOC-131 of 2023-24 session now.

Following are the transactions for the year ended December 31, 2018.

Rs.
January Stock out on hire at cost. 6,000
Stock on hand (at shop) 1,000
Installment due 600
Cash Received. 16,000
December 31 Stock out on hire (at cost) 6,900
Stock on hand (at shop) 1,400
Installment due 1,000

To calculate the profit or loss on hire purchase using the Debtors Method, we need to consider the following information:

1. Initial stock out on hire at cost: Rs. 6,000
2. Installments due during the year: Rs. 600 (January) + Rs. 1,000 (December 31) = Rs. 1,600
3. Cash received during the year: Rs. 16,000
4. Stock on hand at the end of the year: Rs. 1,400

Now, let’s calculate the total hire purchase price:

Total Hire Purchase Price = Initial stock out + Installments due – Cash received
= Rs. 6,000 + Rs. 1,600 – Rs. 16,000
= Rs. (6,000 + 1,600 – 16,000)
= Rs. (7,600 – 16,000)
= Rs. (-8,400)

Since the total hire purchase price is negative, it indicates a loss.

Now, let’s calculate the loss amount:

Loss on Hire Purchase = Total Hire Purchase Price – Stock on hand at the end
= Rs. (-8,400) – Rs. 1,400
= Rs. (-9,800)

So, the loss on hire purchase, based on the Debtors Method, is Rs. 9,800.