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