Page 203 - Accountancy_F5

Revision Exercise

1. Lipota, a Tanzanian artist, received royalties for his music work from one of the
famous TV broadcasters in Tanzania. He complained that the amount artists receive
from their works is lower than the investments they are making. He met one of his
friends who advised him about the minimum rent. His finance director is worried
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about introducing minimum rent as it will complicate the treatment of royalties
in the books of accounts. Lipota is insisting on minimum rent, and he decided to
proceed with the agenda.
Required:
LANGUAGE EDITING
(a) To simplify the recording of accounting entries, provide guidance to Lipota
regarding the essential considerations for minimum rent that ought to be
incorporated into the contract between Lipota and the TV broadcaster.
(b) How might the introduction of minimum rent, as suggested by Lipota,
impact the accounting treatment of royalties for both the artist and the TV
broadcaster.
2. Read the following scenarios and answer the subsequent questions

Scenario 1:

After years of hard work, Sara finally receives recognition for her talent as a writer
when a major publishing house offers to publish her debut novel. As part of the deal,
Sara is entitled to a percentage of the revenue generated from the sales and distribution
of her book. However, she is surprised to learn that her earnings may fluctuate depend-
ing on the popularity of her novel.

Scenario 2:

Maganga, a small business owner, decides to expand his operations by securing a com-
mercial property in a bustling shopping district. The agreement specifies the monthly
payment amount and duration of the contract. Maganga is relieved to find a flexible

arrangement that allows him to adjust his space as his business grows.

Scenario 3:
Asimwe is a landlord who owns several residential properties in the city. She offers
one of her apartments to a young couple looking for their first home. The agreement

outlines the monthly payment amount, due date, and responsibilities of both parties.
Asimwe ensures that the terms of the agreement are fair and transparent for her tenants.

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