Royalty Accounts

Problem 1. Prabhu Coal Co. took a lease from Mr. Prasad on 1 st January 2001 on a royalty of 50 paise per ton of coal raised with a Minimum Rent of Rs. 12000 p. a. and right to recoup shortworking during the first four years of the lease. The Coal raised was as follows: Year Coal Raised / Output 2001 8000 Tons 2002 20000 Tons 2003 24000 Tons 2004 36000 Tons 2005 38000 Tons You are required to pass the necessary journal entries in the books of Prabhu Coal Co. Problem 2. As from 1st January, 1996, the Universal Colliery Company acquired a lease of a coal mine at a royalty of Re. 1 per ton of coal raised, the dead rent (minimum rent) being Rs. 7000 per annum. Each years excess of minimum rent over the actual royalty was recoverable during the next three years. In the first five years, the amount of coal raised was as follows: Year Coal Raised (in Tons) 1996 1,800 1997 5,500 1998 7,500 1999 8,500 2000 9,500 Prepare : (1) Landlord A/c (2) Minimum Rent A/c (3) Short-working A/c and (4) Royalty A/c in the books of Universal Colliery Co. Problem 3. Bengal mining co. took a mine on lease at a royalty of Re. 1 per ton. The minimum rent was fixed at Rs. 4,000 for the first year, Rs. 6,000 for the second year and Rs. 8,000 for year thereafter. Short working of any year could be recouped out of the royalties of next two years only. The production during the first 5 years was as follows: Year Tons 1999 2000 2000 4500 2001 6000 2002 9000 2003 12000 Prepare : (1) Landlord A/c (2) Minimum Rent A/c (3) Short-working A/c and

(4) Royalty A/c in the books of Bengal Mining Co. Problem 4: Bihar Colliery Co. took a lease from Mr. Prasad on the following terms: 1. Minimum rent of Rs. 1,00,000 per annum, merging into a royalty of Rs. 5 per ton 2. Short-workings can be recouped out of the excess of the following year subject to: a) Only 60% of the excess earnings over minimum rent may be used for this purpose and b) No short-workings may be recouped if output falls below 10,000 tons in any year. Output was as follows: Year Output (in tons) 1 4000 2 12000 3 24000 4 30000 Prepare necessary ledger accounts (with minimum rent account) in the books of Bihar Colliery Co. Problem 5: The following information has been obtained from the books of coal mines co. relating to the year 1998 to 2003 Royalty : Re. 1 per ton Minimum rent : Rs. 15,000 per annum Short-workings : 1998 Rs. 9,000 1999 Rs. 6,000 Short-working recovered : 2000 Rs. 5000 2001 Rs. 6,000 Short-working transferred to P & L A/c: 2000 Rs. 4,000 Payment to landlord 2002 Rs. 22,500 2003 Rs. 30,000 You are required to prepare necessary ledger accounts in the books of coal mines co. Problem 6: On 1st January, 2002, Nagpur City Ltd. leased a coal mine at a minimum rent of Rs. 6,000 for the first year, Rs. 10,000 for the second year and thereafter Rs. 20,000 p.a. merging into a royalty of 50 paise per ton with power to recoup short-workings over two years after occurring of shortworkings. From the following figures, prepare Minimum rent A/c, Royalty A/c, Short-working A/c and Landlord A/c in the books of Nagpur City Ltd. Output for 2002 was 6000 Tons Output for 2003 was 17200 Tons Output for 2004 was 44000 Tons Output for 2005 was 100000 Tons Problem 7. Bombay Mining Co. acquired a land on lease from Dewilal on royalty of Rs. 8 per ton of coal raised subject to minimum rent of Rs. 50000 p. a. with a right to recoup the short-working over the next three years period. Following are the particulars:

Years 2001 2002 2003 2004 2005 Prepare :

(1) (2) (3) (4)

Sales in tons closing stock in ton 3000 400 4200 600 5800 700 8200 500 9000 800 Landlord A/c Minimum Rent A/c Short-working A/c and Royalty A/c in the books of Bombay Mining Co.

Problem 8. Royalty Rs. 1.75 per ton, minimum rent Rs. 18000 per annum, recoupment of shortworkings in first three years only. In the year of strike minimum rent is to reduce to 90%. Year Output (tons) 2001 2002 12000 2003 16000 2004 15000 2005 18000 In the year 2004 there was a strike of 45 days. Write up Minimum rent A/c, Royalty A/c, Short-working A/c and Landlord A/c in the books of lessee. Problem 9. Kamptee Coal Co. acquired a lease of a coal mine on a royalty of 50 paise per ton of coal brought on the surface with a minimum rent of Rs. 56000 per year with no right to recoup shortworking except in case of strike. 10% of the coal taken out from the mine is lost in weight in bringing the coal on the surface. Kamptee Coal Co. took out coal from the mine as under: 1st year 20000 tons nd 2 year 80000 tons rd 3 year 120000 tons th 4 year 170000 tons th 5 year 80000 tons (Strike) Show Minimum rent A/c, Royalty A/c, Short-working A/c and Landlord A/c for the first five years. Problem 10. Maharashtra Coal Co. took a mine on 1st July, 1999. Its books are closed on 31st March every year. The minimum rent is agreed upon as follows: Upto the commencement of work Rs. 12000 annually. After the commencement of the work Rs. 18000 annually. The rate of royalty was Rs. 10 per ton. Short-working of any year could be recouped during the subsequent two years. The actual work commenced on 1st April 2001 and was as under: Year Tons 2001-02 1500 2002-03 2500 2003-04 2000

2004-05 3000 Prepare Landlord A/c and Short-working A/c in the books of Maharashtra Coal Co. from 1999-2000 to 2004-05. Problem 11. Vidarbh Colliery Co. took a mine on lease at a royalty of 50 paise per ton with a minimum rent of Rs. 15000 per annum. Each years excess of minimum rent over the actual royalties was recoverable during the subsequent three years. The lease stipulated that in the event of a strike the minimum rent was to be reduced in proportion to the length of the stoppage. The output was as follows: Year Tons 1998 10000 1999 20000 2000 40000 2001 45000 2002 25000 2003 50000 st During the year ended 31 Dec, 2002, there was a stoppage due to strike lasting three months. Write up Minimum rent A/c, Royalty A/c, Short-working A/c and Landlord A/c in the books of Vidarbh Colliery Co. Problem 12. The Assam Coal Co. Ltd. Leased a property from Rajkumar on a royalty of Re. 1 per ton or a minimum rent of Rs. 30000 per annum. Each years excess of minimum rent over royalties is recoverable out of the royalties of next five years. In the event of the strike and the minimum rent not being reached, the lease provided that the actual royalties earned for the year shall discharged all rental obligations for that year. The result of the working is as follows: Rs. st Year ended 31 Dec 1997 actual royalties Nil Year ended 31st Dec 1997 actual royalties 9750 Year ended 31st Dec 1997 actual royalties 27750 Year ended 31st Dec 1997 actual royalties 33750 st Year ended 31 Dec 1997 actual royalties 42000 st Year ended 31 Dec 1997 actual royalties 52000 st Year ended 31 Dec 1997 actual royalties 28500 Year ended 31st Dec 1997 actual royalties 45000 The year 2003 was a strike year. Show: 1) Royalty A/c 2) Landlord A/c in the books of Assam Coal Co. Ltd. Problem 13. Mr. Prem Narayan took a lease of mine from Mr. Nagrajan with effect from Jan 1, 1990, for a period of 20 years. The terms of agreement provided for the payment of the royalty @ Re. 0.60 per ton raised, and a minimum rent of Rs. 12000 per annum with a right to recoup short-workings, within a period of three years immediately succeeding the year in which the short-working arises. It was further agreed that the minimum rent should be reduced proportionately, in case of strike or lock-outs in any year.

You are furnished with the following details: Year Tons raised 2001 23000 2002 18700 2003 15400 (there was a strike for 3 months) 2004 19000 2005 20600 2006 22600 The balance in short-working Account as on Jan 2001 was Rs. 4900, of which Rs. 2200 arose in 1998 and the balance in 1999. Write up Minimum rent A/c, Royalty A/c, Short-working A/c and Landlord A/c in the books of Mr. Prem Narayan for all the above 6 years. Problem 14. Mr. Murarilal took a mine on lease for 15 years. Dead rent per year is Rs. 10000. Shortworkings can be recouped out of excess of royalty in the next 3 years of short-workings. During the year of strike or accident if royalty is less than dead rent, then dead rent is reduced by 60% in the year of strike or accident only. First year when dead rent is to be paid, expires on 31st Dec, excess over royalty paid during first year was Rs. 3000, of the second year Rs. 4000 and of the third year Rs.2000. in the fourth year actual royalty amounted to Rs. 17000 and in the fifth year Rs. 5000. There was strike in the fifth year. Royalty of sixth year amounted to Rs. 10000. Prepare : (1) Landlord A/c (2) Minimum Rent A/c (3) Short-working A/c and (4) Royalty A/c in the books of Mr. Murarilal Problem 15. The Nagpur Coal Co. holds a lease of a Coal mine for a period of 20 years, commencing from 1st April 2001, under a royalty of Rs. 200 per ton coal produced, subject to minimum rent of Rs. 800000 per year. Short-working can be recouped out of royalty in excess of the minimum rent for the next 2 years only. In the year of strike minimum rent was to be reduced proportionately taking into consideration the period of the stoppage of the work. The excess amount paid for the first year was Rs. 375000 and for the second year was Rs. 300000. In the third year the surplus was Rs. 320000 and in the fourth year Rs. 400000. In the fifth year actual royalty amounted to Rs. 500000 only. During the fifth year there was a stoppage of work due to strike lasting 3 months. Write necessary ledger Accounts in the books of Nagpur Coal Co.