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Chapter 10 - Hire Purchase - Illustration 8 - IL Course video 24.
Accountancy
Hello, In the above mentioned question it is given that the amount due to hire vendor is paid in 3 equal installments together with interest, Kindly clarify if this means the 3 installments should be equal and we should find the installment value using PV/Annuity formula or only the principal repayment in those installment should be equal and actually installment value can differ(as shown in video). Thank you.
Answers (15)
Best Answer
Thread Starter
Aswin ChandarOk, But still I need clarification for my initial question. @MODERATORS @ADMIN @FACULTY. Thankyou.
If the question just says 3 equal instalments - then you apply the annuity formula and compute equal instalments. The payment each year would be same. If the question says 3 instalments with interest - it is assumed that principal is divided in 3 parts and principal + interest accrued is paid.
Shankari C
Installments will be equal with different interest amount but same principal value
Hey if Installment value and principal repayment is same in every year, interest should be equal which isn't possible so kindly reconsider your answer. Thank you.
Shankari C
No... interest will be on cash price..so my answer is right
Lets say amount due is 180,000 and equal instalments are 60000 each, then interest for 1st period would be on 180k and interest for 2nd period would be on (180k - principal repaid) which would be less than interest for 1st period. @moderators kindly comment if I am right and help me with the above doubt. Thankyou.
Shankari C
This is right only..
Ok, But still I need clarification for my initial question. @MODERATORS @ADMIN @FACULTY. Thankyou.
CA Suraj Lakhotia Admin
If the question just says 3 equal instalments - then you apply the annuity formula and compute equal instalments. The payment each year would be same. If the question says 3 instalments with interest - it is assumed that principal is divided in 3 parts and principal + interest accrued is paid.
Yes that's what I understood. Thanks for the clarification sir. kindly verify the above mentioned video then. Thankyou.
CA Suraj Lakhotia Admin
Its done that way only right?
The question says "equal installments with interest" so shouldn't the 3 installments be equal and we should use annuity formula?
CA Suraj Lakhotia Admin
Pls share the full sentence
Equal installments with interest is assumed to be equal principals + interest thereon.
CA Suraj Lakhotia Admin
Equal installments with interest is assumed to be equal principals + interest thereon.
Ok thanks for the clarification sir.
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