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