P. Co. Ltd. took a mine on lease from A at an agreed rate of royalty with a minimum rent of ~ 20,000 a year. Each year’s excess of minimum rent over royalties is recoverable out of the royalties of the next year only. In the event of a strike and the minimum rent not being realised, it was provided that the actual royalties earned for that year would be the full royalty obligation for the year. The actual royalties were calculated as follows:
2011 —- Nil; 2012 —- Rs.24,000; 2013 —- Rs. 16,000; 2014 —- Rs. 18,000.
The reason for the fall in the amount of royalties for 2012 was a strike lasting over a period of three months. Prepare necessary Ledger Accounts in the books of P. Co. Ltd. recording the above transactions for all the years.
Q422. Minerals Ltd. leased a property from Shri B. Sarkar at a royalty of Rs. 1.50 per ton with a minimum rent of ~ 10,000 per annum. Each year’s 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 discharged all rental obligations for the year. The results of working of the property are given below: (actual royalty) 2007—- Nil; 2008 —- Rs. 3,300; 2009 —- Rs. 9,000; 2010 —- Rs.11,100; 2011 —- Rs.14,000; 2012 —- Rs.15,000; 2013 (strike year) —- Rs. 8,000; 2014 —- Rs. 15,200.
Write up the Minimum Rent Account and Royalties Account showing the amount charged to Profit and Loss Account each year.
