Financial Accounting

Jalani Distributors sold three light commercial vans

Jalani Distributors sold three light commercial vans to Jain Enterprises on January 1, 2017, on hire purchase system. The price of each van was Rs. 90,000 payment of which was to be made as follows :

i) Rs. 30,000 as a down payment for each van;
ii) The remaining amount in 3 annual equal instalments along with interest @ 15%.

Jain Enterprises were charging depreciation @20% each year on the written down value method. After payment of the first instalment as on December 31, 2017, they could not pay further instalments. It was agreed between the parties for repossession of two vans adjusting their value against the amount due, For the purposes of repossession. Depreciation @ 30% p.a. was charged.

Repossessed goods were repaired at a cost of Rs. 2,000 and were then sold for 92,000. Calculate the value of repossessed stock and show the necessary accounts in the books of both parties.

Solution

In the books of Jain Enterprises

Dr                                           Light Commercial Van A/c                           Cr

Date Particulars Amount Date Particulars Amount
1-1-2017 To Jalani Distributors (90000×3) 270000 31-12-2017 By Depreciation (20% of 2,70,000) 54000
        By Balance c/d 216000
    270000     270000
1-1-18 To Balance b/d 216000 31-12-18 By Depreciation 43200
      31-12-18 By Jalani Distributors 88200
      31-12-18 By Profit & Loss A/c 27000
      31-12-18 By Balance c/d 57600
    216000     216000
1-1-89 To balance b/d 57600      

Dr                                                        Jalani Distributors’ A/c                                Cr

Date Particulars Amount Date Particulars Amount
1-1-17 To Bank A/c (Down payment) 90000 1-1-17 By Light Commercial Vans 270000
31-12-17 To Bank A/c (First Instalment) 87000 31-12-17 By interest A/c 27000
31-12-17 To Balance c/d 120000      
    297000     297000
           
31-12-18 To Light Commercial Vans 88200 1-1-18 By Balance b/d 1,20,000
31-12-18 To Balance c/d 49800 31-12-18 By Interest 18,000
    138000     1,38,000
           
      1-1-89 By Balance b/d 49800

Books of Jalani Distributors

Jain Enterprises’A/c

Date Particulars Amount Date Particulars Amount
1-1-17 To Sales A/c 270000 31-12-17 By Bank (Down Payment ) 90000
31-12-17 To Interest A/c 27000 31-12-17 By Bank A/c (First Instalment) 87000
      31-12-17 By Balance c/d 120000
    297000     297000
           
1-1-18 To Balance b/d 120000 31-12-18 By Goods Repossessed 88200
1-1-18 To Interest A/c 18000 31-12-18 By balance c/d 49800
    138000     138000
           
1-1-19 To Balance b/d 49800      

Goods Repossessed A/c

Date Particulars Amount Date Particulars Amount
31-12-18 To Jain Enterprises A/c 88200 31-12-18 By Cash A/c (Sale) 92000
31-12-18 To Interest A/c 2000      
31-12-18 To Profit and Loss A/c (Profit on Sale) 1800      
    92000     92000

Working Notes

Calculation of Value of Repossessed Vans

Cost Price of 2 Vans   (90000×2)                    180000

Depreciation

First Year (180000×30%)       54000

Second Year (126000×30%)  37800              91800

Value of Repossessed Vans                            88200             

Loss of Repossession

Cost Price of 2 Vans   (90000×2)                    180000

Depreciation

First Year (180000×20%)       36000

Second Year (144000×20%)   28800              64800

Depreciated Values of 2 Vans                        115200                       

Less: Value of vans at higher depreciation   88200

Loss on Repossession                                     27000 

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