Operation of Hire Purchase System - SS3 Accounting Past Questions and Answers - page 1
1
What is the hire purchase system?
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A
A method of financing the purchase of an asset where the buyer makes regular instalment payments to the seller
B
A method of financing the purchase of an asset where the buyer pays the full purchase price upfront
C
A method of renting an asset for a fixed period of time
2
Who retains ownership of the asset during the term of the hire purchase agreement?
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A
The buyer
B
The seller
C
Both the buyer and the seller
3
What happens to the ownership of the asset once all payments have been made?
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A
It remains with the seller
B
It transfers from the seller to the buyer
C
It is shared between the buyer and the seller
4
What is the deposit in a hire purchase agreement?
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A
The regular instalment payments made by the buyer to the seller
B
The interest charged by the seller on the outstanding balance of the purchase price
C
The initial amount paid by the buyer at the time of signing the hire purchase agreement
5
What happens if the buyer fails to make the required payments in a hire purchase agreement?
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A
The seller may terminate the hire purchase agreement and repossess the asset
B
The seller may reduce the instalment payments
C
The buyer will automatically own the asset
6
What is the purpose of the hire purchase system?
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7
Who retains ownership of the asset during the term of the hire purchase agreement?
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