Reference no: EM132905778
Demonstrate the accounting entries in the books of the leses when shortcomings are involved in the following situations;
-When royalties bed on output fall below minimum rent.
-When amounts due are paid to the landlord.
-At the end of the financial year.
-In future, when royalties based on output exceed the minimum rent.
-When amounts due are paid to the landlord.
-At the end of the financial year.Fingers Ltd leased a coal mine from Hand Ltd at a minimum rent of $150,000 per annum on which royalty fees were payable at $10 000 per tonneau. There was a stipulation that shortcomings could only be recouped in the first years of the lease.
The output in the first four years of the lease were 8 tones, 13 tones, 21 tones, 21 tones, and 18 tones respectively.
Show the entries to be made in the books of Finger Ltd in the first four years assuming the lease commenced on Jan 1997.