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Recoupment of Short Workings of Royalty with examples


Example: A coal company leased a land for a minimum rent of Rs. 900 for 1st year, Rs.1, 200 for 2nd year, Rs. 1, 800 for 3rd year, Rs. 2, 500 and Rs. 3, 000 for 5th year. The royalty at the rate is Rs. 0.60 per ton of output. The company leased a land for 15 years. The output of 6 years is given below:
Years
Output per ton
1
1, 200
2
1, 800
3
2, 600
4
4, 900
5
5, 700

Find out the short working and surplus with the help of royalty table. The short working recouped whole year of lease.
Solution:
Years
Output per ton
Royalty @ Rs. 0.60 per ton of output
Minimum rent
Short working
1
1, 200
720
 900
180
2
1, 800
1, 080
1, 200
120
3
2, 600
1, 560
1, 800
240
4
4, 900
2, 940
2, 500
----
5
5, 700
3, 420
3, 000
----

Surplus
Short working recouped
Un-recouped short working transferred to profit and loss a/c
Payment to landlord
----
-----
-----
900
----
-----
-----
1, 200
----
-----
-----
1, 800
440
440
-----
2, 500
420
100
-----
3, 320

Example: A coal mine company took a land on lease for 25 years on minimum rent of Rs. 12, 000 per year. The royalty is Rs. 3 per ton of output. The royalty is due on 31st march but payment made on 31st December. The financial year started from 1st April 2006 and ended on 31st March 2006. The short working of royalty is recouped after first four years of commencement of productions. The leased period started from 1st June 2006 and the outputs of four years are as follows:

Years
Output per ton
1
3, 200
2
4, 800
3
2, 600
4
4, 100
The minimum rent is Rs.10, 000 per year.
Solution:
Years
Output per ton
Royalty @ Rs. 3 per ton of output
Minimum rent
Short working
2006
3, 200
9, 600
 10, 000
400
2007
4, 800
14, 400
10, 000
----
2008
2, 600
7, 800
10, 000
2, 200
2009
4, 100
12, 300
10, 000
----

Surplus
Short working recouped
Un-recouped short working transferred to profit and loss a/c
Payment to landlord
----
-----
-----
10, 000
4, 400
400
-----
14, 000
----
-----
-----
10, 000
2, 300
2, 200
-----
10, 100

Example: ABC Mine Company took an 800 arc land on lease for 10 years from Mr. X. Under the lease agreement the royalty paid @ of Rs. 4 per ton and the minimum rent is Rs. 12, 000 per year.  It is also mentioned in the agreement that the royalty paid on half yearly basis. Find out the short working of royalty and surplus of royalty. The excess of minimum rent over royalty is recouped by surplus of royalty (excess of royalty over minimum rent). The short workings of royalty are recouped only in first 3 half yearly years. The output is as follows:
Years
Output per ton
June 2009
3,000
Dec 2009
4, 500
June 2010
2, 500
Dec 2010
5, 100
June 2011
8, 000
Dec 2011
10, 000

Solution:

Years
Output per ton
Royalty @ Rs. 4 per ton of output
Minimum rent
Short working
June 2009
2,800
11, 200
 12, 000
800
Dec 2009
4, 500
18, 000
12, 000
----
June 2010
2, 500
10, 000
12, 000
2, 000
Dec 2010
5, 100
20, 400
12, 000
----
June 2011
8, 000
32, 000
12, 000
----
Dec 2011
10, 000
40, 000
12, 000
----

Surplus
Short working recouped
Un-recouped short working transferred to profit and loss a/c
Payment to landlord
----
-----
-----
12, 000
6, 000
800
-----
17, 200
----
----
2, 000
12, 000
8, 400

-----
20, 400
20, 000
-----
-----
32, 000
28, 000
2, 200
-----
40, 000


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