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 :
- Rs. 30,000 as a down payment for each van;
- The remaining amount in 3 equal annual instalments along with interest @ 15%.
Jain Enterprises was charging depreciation of @20% each year on the written-down value method. After payment of the first instalment as of December 31, 2017, they could not pay further instalments.
It was agreed between the parties to repossess 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 | |
Less: 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 | |
Less: 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 Respossession | 27,200 |
Conclusion
This illustration helped you understand how to calculate the value of repossessed goods.