In the books of E.C. Ltd
Repossession of a part of the Asset
The·hire vendor, however, may not be’ harsh enough to take possession of the entire asset. He may leave some portion of the asset with the hire-purchaser. In that case; the purchaser should leave’ the proper balance in the account of the asset, representing the present value of the asset stillin hand and write off the balance.
Illustration 7. X Transport Ltd. purchased from Delhi Motors 3 trucks costing Rs. 5,00,000each on the hire ,purchaSe system. Payment was to be made Rs. 3,00,000 ~ and the remainder in 3 equal instalments together. with interest @ 18% p.a. X Transport Ltd. wrote off depreciation @ 20% on the diminishing balances. It paid the instalment due at the end of the first year but could not pay the next. Delhi Motors’ agreed to leave one truck with the purchaser, adjusting the value of the other 2 trucks against the amount due. The trucks were valued on the. basis of 30% depreciation annually on diminishing balances. Prepare .the .necessary ledger accounts in the books of X Transport Ltd. for 2 years. Also show journal , entries for all the transactions taking place on the date of default.