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Determine the hire purchase price and instalment per month

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Reference no: EM132935684

QCR Bhd had an old multipurpose van with carrying amount of RM145,000 on 31 December 2019. The management suggested to purchase a new model of the van to increase the efficiency of its operation. The cash price of the new van was RM371,500 and QCR Bhd decided to purchase the van under hire-purchase agreement with GreatMotors Sdn Bhd commencing on 1 March 2020 for 18 months. To pay the deposit, QCR Bhd sold the old van at the price of RM115,000 and 50% of the cash received was paid as deposit for the new van. The interest rate charged by GreatMotors of the new van is 2.4% per annum.

QCR Bhd also purchased a truck under hire-purchase agreement on 1 June 2020 and will complete the payments on 31 January 2022. The cash price and hire purchase price of the truck were RM297,000 and RM303,567, respectively. On 1 June 2021, QCR Bhd received a notice of repossession due to its failure to pay the instalments of April and May 2021 and the truck has been repossessed 21 days later. The storage and repossession cost incurred was RM3,510. The truck can be sold at RM250,000. On repossession date, the balance of hire-purchase creditor account (truck) of QCR Bhd is RM201,780. After the settlement of the repossession, QCR Bhd received RM44,710 from the owner.

QCR Bhd uses gross method to account for the hire purchase and amortize the interest on hirepurchase using sum-of-the-years digit method. The financial year end of the company is on 31 December.

Problem (a) Determine the hire purchase price and instalment per month for the new van.

Problem (b) Prepare the related journal entries on 1 March 2020 and 31 March 2020.

Problem (c) Determine whether QCR Bhd received appropriate amount of payment for repossession settlement.

Reference no: EM132935684

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