(A) Mining Royalties
Writing off Shortworkings in the first some Years of the lease
A company took a lease of a colliery on 1st April 20kinat avertine uygun rest of 2 9,000 merging into a more
50 paise per tonne with a power to recoup shortworkings over the first three years of lease. The outpe
colliery for the first three years was 12,000; 19,000 and 21,000 ton respectively.
Draft the necessary journal entries in the books of the company and show Shortworkings: Minimum k
Royalties Accounts.
Answers
Explanation:
. Collieries Co. Ltd. took from M/s Bihari Bros, a lease of a coal field for a period of 25 years from 1st April, 2007 on a royalty of Rs 25 per tonne of coal extracted with a Dead Rent of Rs 2,20,000 a year with power to recoup short-workings during the first five years of the lease. The company closes its books of account on 31st March every year.
The output in the first five years of the lease was as follows:
(a) Pass journal entries for all the transactions relating to royalties for the five years in the books of S.K. Collieries C. Ltd.
(b) Suppose, output for the year ended 31st March, 2012 was 14,000 tonnes only. What would be the journal entries for the year 2011-2012 then?
Solution:
Before proceeding to pass journal entries, preparation of the following chart minimises the chances of mistakes in the amounts of the journal entries: