Page 201 - Accountancy_F5

Exercise 6.3
1. Deka Ltd. acquired rights from Nassa Ltd. to manufacture and sell a certain brand
of perfume on the following terms:
(a) Royalty shall be paid on number of bottles manufactured at TZS200 per bottle.
(b) The minimum royalty in any one year shall be TZS500,000.
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(c) Short workings will be recouped within the first three years of the contract.
(d) The agreement to become effective on 1 July 2018; and
st
(e) All settlements were made on 31 December, each year.
st
On 1 January 2020, Deka Ltd. granted right to Mwinula Ltd. to manufacture
st
and sell the same perfumes on the following terms:
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(i) Royalty shall be paid on number of bottles manufactured at TZS 300 per bottle/
per unit;
(ii) The minimum royalty in any one year shall be TZS200,000; and
(iii) Short workings recouped only in the year of agreement following the year of
short workings.
The following information is provided:

Years Deka Ltd. Mwinula Ltd.
2018 8,000 -
2019 11,000 -
2020 14,000 7,000
2021 16,000 11,000
2022 12,000 5,000

Required: Prepare ledger accounts in the books of Deka Ltd.

2. Asha Ltd. is operating a stone quarry under lease from Alex Ltd., the owner of the
quarry. The lease was for a period of 10 years effective from 1 January 2020. The
st
terms for the lease stipulated that: Royalty is TZS 40,000 per a tonne of stones
raised; minimum rent was TZS 10,000,000 per annum with the right to recoup
short workings in the first four years of the contract.
Asha Ltd. granted a sub-lease to Prisca Ltd. of one third of the area of the land
for a period of four years from January 2021, for a minimum rent of TZS 80,000
per annum; royalty TZS 60,000 a tonne of stones raised. The right of recoupment
of short workings was granted for the first two years from the date the sub-lease.
The output for the first four years was as follows:

Student’s Book Form Five
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