Calculation of Interest Charge - SS3 Accounting Past Questions and Answers - page 1
1
What is the interest charge in a hire purchase agreement?
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A
The amount paid by the buyer for the asset
B
The interest paid by the seller to the buyer
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C
The interest charged by the seller on the outstanding balance of the purchase price
2
How is the interest charge usually expressed in a hire purchase agreement?
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A
As a percentage of the purchase price
B
As a fixed amount per instalment payment
C
As a percentage of the outstanding balance
3
What is the formula for calculating the interest charge in a hire purchase agreement?
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A
(Outstanding balance x Interest rate / 12)
B
(Total installment payments made x Interest rate / 12)
C
(Purchase price x Interest rate / 12)
4
Does the interest charge remain the same throughout the term of the hire purchase agreement?
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A
Yes
B
No, it decreases over time
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C
No, it increases over time
5
Is the interest charge included in the regular instalment payments made by the buyer?
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A
Yes
B
No
C
It depends on the terms of the agreement
6
How is the outstanding balance in a hire purchase agreement calculated?
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7
Does the interest rate in a hire purchase agreement vary depending on the terms of the agreement?
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