a firm of coal merchant purchased wagons on hire purchase system.payment is to be made in a period of four years. rs. 6,000 was payable ondelivery (1st jan. 2011) and the balance by annual instalement of rs. 6,000each on 31st december. the ilire-vendor charged 5% p.a. interest on theyearly balances.

From what I've understood, the initial payment: Rs. 6,000 on January 1, 2011.

Subsequent payments: Annual installments of Rs. 6,000 on December 31st for four years.

Interest: 5% per annum on the outstanding balance at the end of each year.

Hire Purchase System Explained

Hire purchase is a credit agreement where a buyer can acquire goods by making an initial payment and subsequent installments. Ownership of the goods doesn't transfer until the final payment is made.

Calculating Interest and Installments

To determine the total cost and interest paid, we need to calculate the interest for each year based on the outstanding balance.

Year 1:

Outstanding balance at the beginning of the year: Rs. 6,000

Interest for the year: Rs. 6,000 * 5% = Rs. 300

Total amount due at the end of the year: Rs. 6,000 (installment) + Rs. 300 (interest) = Rs. 6,300

Year 2:

Outstanding balance at the beginning of the year: Rs. 12,000 (previous balance + new installment)

Interest for the year: Rs. 12,000 * 5% = Rs. 600

Total amount due at the end of the year: Rs. 6,000 (installment) + Rs. 600 (interest) = Rs. 6,600

Year 3:

Outstanding balance at the beginning of the year: Rs. 18,000

Interest for the year: Rs. 18,000 * 5% = Rs. 900

Total amount due at the end of the year: Rs. 6,000 (installment) + Rs. 900 (interest) = Rs. 6,900

Year 4:

Outstanding balance at the beginning of the year: Rs. 24,000

Interest for the year: Rs. 24,000 * 5% = Rs. 1,200

Total amount due at the end of the year: Rs. 6,000 (installment) + Rs. 1,200 (interest) = Rs. 7,200

Total Cost and Interest

Total amount paid: Rs. 6,000 (initial) + (4 * Rs. 6,000) = Rs. 30,000

Total interest paid: Rs. 300 + Rs. 600 + Rs. 900 + Rs. 1,200 = Rs. 3,000

Cash price of the wagon: Rs. 30,000 - Rs. 3,000 = Rs. 27,000

Therefore, the cash price of the wagon is Rs. 27,000 and the total interest paid is Rs. 3,000.

Hope this helps