Page 187 - Accountancy_F5

(a) Royalty shall be paid TZS 40, 000 per kg.
(b) Minimum royalty shall be TZS 50,000,000 per month.
(c) Short workings should be recouped within the first two months.
(d) Settlement will be made on a monthly basis.
Agreement came into effect on 1 May 2023 and the following quantities of minerals
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were extracted by Nundu Ltd. during the first five months:
FOR ONLINE READING ONLY
Month May June July August September

Output (Kgs) 900 1300 1700 2500 3000
Required: Prepare journal entries to record the above entries in the books of Nundu Ltd.
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3. On 1 January 2020, Motisha Ltd. acquired rights from Dasia Ltd. for the production
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of Tamu, a soft drink brand developed and owned by Dasia Ltd. It was agreed that
royalty would be TZS 40 per bottle produced. The minimum rent shall be TZS
15,000,000 and short workings would be recouped within two years following the
payment of short workings.
The following table presents the number of units produced for a period of five years:

Year 2020 2021 2022 2023 2024
Output (units) 250,000 300,000 400,000 250,000 500,000
Required: Prepare ledger accounts in the books of Motisha Ltd. for a period of five
years ending 31 December 2024.
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Accounting entries in the books of lessee
The lessee shall maintain the following accounts to record his transactions with the lessor:

Royalty payable account
This account records amount of royalties increased in any period by the user of asset to
owner based on output upon discussion.
Lessor account
This account is used to record royalty payable amount paid to the lessor and short workings.

Short workings recoverable account
This account is used to record the excess amount of minimum rent over the actual
royalties and any amount recovered thereof.

Student’s Book Form Five
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