75-Hire Purchase

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1).
When examining for deficiencies of stock, a firm would not make allowances for which of the following?
2).
Which of the following is the act of buying an asset without having to make full payment in the immediate future?
3).
The rules for how to deal with leases and hire purchase contracts is dealt with in which accounting standard?
4).
Which of the following would not make a distinction between a hire purchase and a ‘normal’ purchase?
5).
On the balance sheet of a company, the value of the asset bought through hire purchase will appear as which of the following?
6).
The depreciation on an asset purchased through hire purchase should be which of the following?
7).
The profit on interest charged on the hire purchase should appear in the profit and loss account in what manner?
8).
When does the asset legally belong to the purchaser under a hire purchase agreement?
9).
Which of the following does not give a difference between a hire purchase and a normal purchase?
10).
When making repayments on a lease, the profit and loss account will contain which items relevant to the lease?
1. When examining for deficiencies of stock, a firm would not make allowances for which of the following?
[A] Changes in market conditions
[B] Stealing by customers
[C] Thefts by employees
[D] Wastage of goods
2. Which of the following is the act of buying an asset without having to make full payment in the immediate future?
[A] Operating lease
[B] Hire purchase
[C] Sale and leaseback
[D] Finance lease
3. The rules for how to deal with leases and hire purchase contracts is dealt with in which accounting standard?
[A] FRS 16
[B] FRS 19
[C] SSAP 21
[D] SSAP 20
4. Which of the following would not make a distinction between a hire purchase and a ‘normal’ purchase?
[A] Purchaser pays for item by instalments over a period of time
[B] Asset does not belong to purchaser when delivery is received from supplier
[C] Cost to buyer is likely to be higher than it would be for a normal purchase
[D] Trade discounts cannot be offered on hire purchase
5. On the balance sheet of a company, the value of the asset bought through hire purchase will appear as which of the following?
[A] Cost less depreciation to date less amount owing on hire purchase less interest owing
[B] Cost less amounts owing on hire purchase
[C] Cost less depreciation to date
[D] Cost less depreciation to date less amount owing on hire purchase
6. The depreciation on an asset purchased through hire purchase should be which of the following?
[A] Should be straight line only
[B] Based on the cost price of the asset only
[C] Based on the total cost including interest
[D] No depreciation should be provide until the final payment is made
7. The profit on interest charged on the hire purchase should appear in the profit and loss account in what manner?
[A] The interest charged in that period only should be included
[B] Interest should be apportioned in proportion to the repayment totals
[C] The total interest levied should be divided equally over the total period the for purchase agreement
[D] Interest should instead be capitalised on the balance sheet
8. When does the asset legally belong to the purchaser under a hire purchase agreement?
[A] Final installment is paid
[B] Final installment is paid and purchaser agrees to a legal option to buy the asset
[C] On date of first installment in repayment
[D] Purchaser agrees to legal option to buy the asset
9. Which of the following does not give a difference between a hire purchase and a normal purchase?
[A] Timing of payment for asset
[B] Total cost of asset
[C] Quality of asset purchased
[D] Legal ownership of asset
10. When making repayments on a lease, the profit and loss account will contain which items relevant to the lease?
[A] Neither interest or instalment charges
[B] Instalment charges only
[C] Interest and instalment charges
[D] Interest only
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