Page 191 - Accountancy_F5

Solution 6.8
Analysis table
Year Output Royalty Minimum Short Recoupment Irrecoverable Payment
payable rent workings short to lessor
workings
TZS TZS TZS TZS TZS TZS
FOR ONLINE READING ONLY
2019 6,250 1,250,000 1,500,000 250,000 - - 1,500,000
2020 6,875 1,375,000 1,500,000 125,000 - - 1,500,000
2021 7,200 1,440,000 1,500,000 60,000 - - 1,500,000

2022 8,500 1,700,000 1,500,000 - 200,000 235,000 1,500,000
LANGUAGE EDITING
2023 10,250 2,050,000 1,500,000 - - - 2,050,000
2024 11,000 2,200,000 1,500,000 - - - 2,200,000

Note:
- The excess of royalties rent over minimum rent in the year 2022 is used to recoup
short workings accumulated for 3 years.
- Total accumulated short workings in the first 3 years is TZS 435,000 (250,000 +
125,000 + 60,000). Excess royalties in 2013 is TZS 200,000, therefore short workings
will be recouped to a maximum of TZS 200,000.
- Hence, TZS 235,000 will remain unrecouped by the end of the 4th year [period
for which recoupment is allowed]. This amount will be transferred to the income
statement.

Dr Royalty payable account Cr
Date Details TZS Date Details TZS
31 Dec. 2019 Geita Soil Ltd. 1,250,000 31 Dec. 2019 Manufacturing 1,250,000
st
st
st
31 Dec. 2020 Geita Soil Ltd. 1,375,000 31 Dec. 2020 Manufacturing 1,375,000
st
31 Dec. 2021 Geita Soil Ltd. 1,440,000 31 Dec. 2021 Manufacturing 1,440,000
st
st
31 Dec. 2022 Geita Soil Ltd. 1,700,000 31 Dec. 2022 Manufacturing 1,700,000
st
st
31 Dec. 2023 Geita Soil Ltd. 2,050,000 31 Dec. 2023 Manufacturing 2,050,000
st
st
31 Dec. 2024 Geita Soil Ltd. 2,200,000 31 Dec. 2024 Manufacturing 2,200,000
st
st

Student’s Book Form Five
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