On Oct 1, 2007 five cars were purchased by Sathya on Hire Purchase System. The cash price of each car was Rs 2,75,000. The payment was to be made as follows:
- 10% of Cash Price at the time of delivery
- 25% of Cash Price at the end of each one of the subsequent four half years.
The payment due on Sep 30, 2008 could not be made and, hence, cars were seized by the hire vendor but after negotiations, Sathya was allowed to keep three cars on the condition that the value of the other two cars would be adjusted against the amount due, the cars being valued at Cost less 25% depreciation and Sathya would pay the balance in five half yearly Installments together with interest @ 10% p.a. Both the parties close their Books of Account on 31st Mar every year. Sathya charges 15% depreciation on cars on the original cost.
In Oct 2008, the hire vendor spent Rs 30,000 on getting the seized cars thoroughly overhauled and sold them for Rs 4,75,000.
Prepare for two accounting years ended on 31 Mar, 2009. (i) Cars Account in Sathya’s ledger assuming that Sathya debited it with full cash price in the beginning of the contract and (ii) the personal account of Sathya and goods repossessed account in hire vendor’s ledger.