GTN.

Arts college (ssc)

Royalty
1.Bengal Co Ltd lease to a collory 1st Jan 1981 minimum rent of Rs.15000 varying into a royalty of Rs.1 per ton stipulation to recoup short working over the first 3 years of the lease. The output for first 4 years of the lessee was 8000, 13000, 21000, and 18000 tons respectively pass necessary journal entries in the books of company giving effect above.

2.Amaravathi ltd took lease of a mine for period of 20 years for TPR ltd. The terms and conditions were as Follows:a) Minimum rent was Rs.4000 per year. b) Production per unit was Rs.2 per ton. c) If minimum rent in more than actual production the short working should be recouped within the First Four Years. Lessee should be the Following production information. I Year 1000 tons II Year 2000 tons III Year 2500 tons IV Year 4000 tons

Your are required to pass entries and prepare, a) Minimum rent a/c, b) Short working a/c, c) Royalty a/c, d) TPR led a/c.

3.The conselt colliery company took a lease of a mine from big company for a period of 30 years from 1st Jan 1964 up on the terms of a royalty of 50 paisa per ton upon the compute with a minimum rent of Rs.10000 in the first year and then increasing every year by Rs.1000 till is reaches Rs.13000. when in becomes fixed for all the coming years the conselt company was granted the right of recouping short working of any year in the subsequent 3 years and not after words. The following was the production of first five year. 1965 3000 tons 1968 - 30000 tons , 1976 24000 tons, 1969 32000 tons, 1966 18000 tons.

Show the journal entries in the books of Conselt Company when there is no minimum rent a/c.

4.Hindustan steel Ltd obtained a lease from Gogelwan coal ltd for a coal mine on 1 st Jan 1965 on the following terms.

i. ii.

Royalty at Rs.1 per ton raised M.R. Rs.12000 p.a.

iii. Recouped of S.W. on each year during three following subject to a maximum of Rs.2500 p.a. iv. In the event of strike maximum rent should be taken per ton on the basis of actual working days but in the event of lockout they would enjoy a concession in respect of minimum rent of 50% of the period of lock out.

v. Besides the above Hindustan Steel Ltd have been granted a cash subsidy equal to 25% of the unrecouble S.W. by the Central Government up to the First 4 years of the lease.

5.X Coal Ltd, has taken a lease coal fields on the following terms. I. III.

II.

Lease is for 99 years. Lease rent is to be 50 paisa per annum for yearly tones of coal raised. Minimum royalty per annum is to be Rs.30000 the lease has a right to recoup any short working with in a lease of three years. For which the excess payment was made. IV.In case the working of the minus was effected any strike or lock and there were no rising, in the minimum rent payable would able proportionately. V.The Following were the raising for different years. 1979 20000 tons, 1950 35000 tons, 1981 30000 (there was a strike for 3 month during which no coal was mines) 1982 70000 tons, 1983 80000 tons, 1984 100000 tons You are required to show the royalty, short working, and landlord a/c in the books of X coal ltd. 6.R& Co Ltd leased a property from A at a royalty of Rs.1.5 per ton with the minimum rent of Rs.2000 p.a. each year excess of M.R. over royalty is recoverable out of the royalty of the next five years in the event of the strike the M.R. The lessee provided that S.W. should reduced proposonatly to then actual working the result of working follows. Years 1969 Royalty Nil 1970 650 1971 1850 1972 2250 1973 3500 1974 1200 (Strike for 4month) 1975 3000

7.On 1st Jan 1982 bright ltd patents of a new type of gas burner issued a liena to popular ltd for the manufactured and sale of purchase for five years the following terms, i. Popular Ltd to pay a royalty of Rs.100 for every burner manufactured subject to a M.R. of Rs.50000 p.a. ii. If for any year the royalty calculated on the business manufactured amount to less than the M.R. in the within two years only but not. iii. Payment to be made 31 Dec sales and stock of business for this years were

Production Year 1982 1983 1984 1985 1986 Sales (unit) 200 400 600 550 230 Stock (unit on 31 Dec) 50 100 70 150 20

You are required to show the (i) Royalty (ii) short working (iii) bright ltds a/c in the books of popular ltd. Who close their a/c on 31st Dec in each year. Exercise

1) On 1.1.81, A company leased a piece of land for a minimum rent of Rs.1000 in the

first year, Rs.2000 in the second year and thereafter Rs.3000 per annum, merging into a royalty of 25 paise per tone, with power to recoup short workings over the first three years only. The annual outputs for the four years ending with 31.12.84 were Rs.1000, 6000, 16000 and 24000 tones respectively. Write up the short working A/C. of 15year. The company agreed to pay royalty of Rs.1 per tone with a minimum rent of Rs.15000. the short workings can be recouped under the agreement during the first five years but on the condition that the year in which the royalty will be more than minimum rent, only 50% of the excess can be used for the recoupment of short workings. The output of coal during the first 5 years was 9000, 12000, 15000, 20000 and 24000 tones respectively. Prepare necessary accounts in the books of Bengal coal co. ideal manufacturers Ltd., the use of the patent for a royalty of Rs.10 per television set manufactured subject to minimum of Rs.10000 in the first year, Rs.12000 in the second year and Rs.15000 thereafter. Any short working is recoverable out of the royalties of the three years subsequent to the year in which short working arises. The output is as under: 1st year 300; 2nd year 400; 3rd year 1900; 4th year 2000; and 5th year 2800. Give journal entries in the books of the company. Rs.4000 per annum. Lease provides that short workings shall be recovered out of excess earnings within 1st five years of the lease and in period of strike the minimum rent stands reduced proportionately for the period not worked. Working results were as follows: Year Production (tones) 1984 Nil 1985 1300 1986 3700 1987 4500 1988 7000 1989 2400 (strike 6 month) 1990 6000

2) Bengal coal co. took a coal mine on 1.4.90 on lease from ram and sons for a period

3) Ashok, a scientist, holds a patent for the manufacture of television sets. He allows

4) K leased a property from R at a royalty of Rs.1 per tone with a minimum rent of

5) The Assam coal company Ltd. Holds a lease of coal mines for a period of 10 years

commencing from 1st January 1999. According to the lease terms the company is to pay one rupee per ton as royalty with a minimum rent of the next two years only. In the year of a strike, the minimum rent is to be reduced to 60%. The output for the 6 years ending 31st December 2004 has been as under 1999 10000 tons 2000 12000 tons 2001 28000 tons 2002 25000 tons 2003 40000 tons 2004 15000 tons Prepare Royalty account, short workings account, and landlord account in the books of Assam coal company Ltd. For the six years.

Assignment

1) Minerals Ltd., leased a property from Sarkar at a royalty of Rs.1.50 per tone with a
minimum rent of Rs.10000 per annum, each years excess of minimum rent over royalties is recoverable out of royalties of next five years. In the event of a strike and the minimum rent not being reached, the lease provided that the actual royalties earned for the year discharge all rental obligation for the year. The result of working of the property were given below: Years Actual royalties in Rs. 1997 Nil 1998 3300 1999 9000 2000 11100 2001 14000 2002 15000 2003 8000 (strike) 2004 15200 Write up the minimum rent account, royalties account and landlords account in the books of lease for each year.

2) Hindustan steel Ltd. Obtained a lease from Gondwana coal Ltd, for a coal mine on 1 st
January 1999 on the following terms and conditions: I. Royalty at Rs.1000 per tone raised. II. Minimum rent Rs.12000 p.a. III. Recoupment of short working on each year during three years following subject to a maximum of Rs.2500 p.a. IV. In the event of strike the minimum rent would be taken pro rata on the basis of actual working days, but in the event of lock-out, the lessee would enjoy a concession in respect of minimum rent for 50% of the period of lock- out. Besides the above, Hindustan steel Ltd. Have been granted cash subsidy equal to 25% of the unrecoupable short workings by the central government up to the five years of the lease. 1999 2000 2001 2002 Actual Actual Actual Actual royalty royalty royalty royalty Rs.7000 Rs.10200 Rs.16100 Rs.13600

2003 2004

Actual royalty Actual royalty

Rs.10100 (strike 3 months) Rs.9700 (Lock-out for 4 months)

Show the ledger accounts in the books of Hindustan steel Co. 3) X Coal Ltd. Has taken on lease coal field Y on the following terms: I) Lease is for 99 years. II) Lease rent is to be 50 paise per annum for every tone of coal raised; III) Minimum royalty per annum to be Rs.30000; the lessee has a right to recoup and short workings within a period of three years for which the excess payment was made. IV) In case the working of the mines was affected by any strike or not and there were no raisings, then the minimum rent payable would rebate proportionately; V) The following were the raisings for the different years: 1970 - 20000 tones 1971 - 35000 tones 1972 - 30000 tones (There was a strike for 3 months during which no Coal was mined) 1973 - 70000 tones 1974 - 80000 tones 1975 - 100000 tones You are required to show the royalty, short workings and the landlords accounts In the books of X Coal Ltd.

4) The Bangla Mine company obtained a mine on lease for a period of 30 years

beginning from 1st January, 1981 on the following terms: 1) To pay minimum rent of Rs.24000 per year. 2) Each years excess of minimum rent over the actual royalties, (short working) can be recovered the subsequent two years. 3) Due to accident or strike minimum rent is to be reduced by 25 per cent for that year. 4) Royalty was to be calculated at 50 paise per tone. Production during four years from 1981 to 1984 was as follows: Years Production in tons 1981 28000 1982 36000 1983 60000 1984 (Strike for 3 months) 44000 Open Minimum rent a/c, Royalties a/c, Landlords a/c and short workings a/c in the books of the Bangla Mine Company.

5) New Steel Ltd. Obtained a lease from Old Coal Ltd, for a coal mine on 1st January,
1979 on the following terms and conditions: 1) Royalty at Rs.1 per tone raised. 2) Minimum Rent Rs.24000 per annum. 3) Recoupment of short workings of each year during three years followings subject to a maximum of Rs.5000 p.a. 4) In the event of strike the minimum rent would be taken pro rata on the basis of actual workings day but in the event of lockout, the lessee would enjoy a concession in respect of minimum rent for 50% of the period of lockout. Besides the above, New steel Ltd. Have been granted a cash subsidy equal to 25% of the unrecoupable short workings by the Central Government up to the first five years of the lease.

Working up to first six years is as follows: 1979 Actual Royalty Rs.14000 1980 Actual Royalty Rs.20400 1981 Actual Royalty Rs.32200 1982 Actual Royalty Rs.27200 1983 Actual Royalty Rs.21600 (Strike 2 months) 1984 Actual Royalty Rs.19400 (Lockout for 4 months) Show the ledger accounts in the books of New steel Ltd.

Prepared by R. Bala, M.com; M.Phil Dept. of commerce with (CA) GTN Arts college, (ssc)