On 1 April 2020, Anita S/B purchased a reconditioned Ford Ka and entered into a hire purchase agreement with a car dealer company Sri Lenggong. The cash price of the Ford Ka is RM84,000. Anita S/B paid a deposit on the same date. Deposit is 25% of the cash price.
The hire purchase agreement contains the following terms:
Interest
8% per annum on the outstanding balance
No. of installments
6 quarterly installments, the first installment due on 30 June
2020
Amount per installments
RM11,100 for the first 5 installments and RM12,028 for the last
installment
After paying the fourth installment, Anita S/B was declared bankrupt and unable to pay the remaining balance to Sri Lenggong. After negotiation, Sri Lenggong agreed to terminate the hire purchase agreement on 5 April 2021 upon a final payment of RM20,000.
All payments are made on the due dates. Both Anita S/B and Sri Lenggong close their books on 31 December each year. Anita S/B provided depreciation on a straight-line basis for 10 years based on monthly ownership.
Required:
Show the interest allocation of the above agreement assuming that the agreement was not terminated earlier than the agreed period.
(4 marks)
Prepare the following accounts for the years ended 31 December 2020 and 2021 in the books of Anita S/B:
Sri Lenggong account
Motor vehicle account
Accumulated depreciation Car
Disposal account