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Why the payments for each year under the hire purchase

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Reference no: EM132970535

Company V is buying an expensive machine under a hire purchase agreement which requires payments over a large number of years.

Problem 1: Which of the following is not a reason why the payments for each year under the hire purchase agreement may not be equal to the depreciation to be charged on the machine for that year?

Select one:

a. The machine will also require maintenance during its useful life.

b. The machine might be revalued for accounting purposes by a competent engineer at some time during its useful life at Company V.

c. The hire purchase payments include interest, which is a finance cost and not part of the initial purchase cost of the machine.

d. The last payment under the hire purchase agreement may be due several years before the machine ceases to be used by Company V.

Reference no: EM132970535

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