Question

The cash price of a machine is Rs. 1,20,000 and its hire purchase price is Rs. 1,50,000 to be paid in five equal yearly installments. If a company purchases the machine on hire purchase basis, the amount of capital expenditure will be _______________.

• A. Rs. 1,20,000
• B. Rs. 1,35,000
• C. Rs. 1,50,000
• D. Rs. 1,60,000

Answer 1

The correct option is A Rs. 1,20,000

Here,

Hire purchase price - Cash Price

= 150000-120000

= 30000 loss,

So,the amount of capital expenditure

150000 - 30000

= 120000