Page 205 - Accountancy_F5

(b) Minimum royalty per year to be TZS 5,000,000; and
(c) Short workings to be recouped one year following the year in which short
workings occurred.
The following are the sales figure for the first five years:

Year 2020 2021 2022 2023 2024
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Sales (units) 1,000 1,500 2,000 2,500 3,000

Required: Prepare journal entries to record transactions relating to the royalty in the
books of Benko Ltd. assuming that settlements are made on 31 December.
st
7. Hof Ltd. granted a lease to Kibanga Mines Ltd. to extract gold from land owned
LANGUAGE EDITING
by him. The agreement stipulated the following terms:
(i) A royalty of TZS 45 per kilogramme of gold extracted;
(ii) A minimum rent of TZS 25,000,000 per annum; and

(iii) Short workings are recoverable up to the end of the fourth year of opera-
tions.

During the first four years, the following quantities were extracted:

Year 2020 2021 2022 2023
Output (kgs) 450,000 520,000 612,000 625,000

The accounting year of the lessee Kibanga Mines Ltd., end on 31 December, the date
st
on which the payment to Mkoloni Ltd., the landlord, is made.

Required: Prepare the appropriate accounts in the books of HOF Limited for each of
the four years.

Student’s Book Form Five
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