(b) On 1st January 2015, Kelly leased a piece of land to Linda for 10 years to extract some natural resources. Linda sub-leased one third of the land to Karis for 6 years on 1 January 2017.
The lease agreement between Kelly and Linda was for payment of sh.1,500 per ton with a minimum rent of sh.20,000,000 per annum. The power to recoup short workings was for the first 4 years following the year the short workings occurred.
The lease agreement between Linda and Karis was for a payment of sh.2,000 per ton with a minimum rent of sh.2,000,000 p.a. The right to recoup short workings was for the first three years from the inception of the contract.
The following are the actual output for the last 7 years. Year end is 31 December.
Year Linda Tons Karis Tons
2015 10,000 500
2016 12,000 800
2017 12,200 1,200
2018 14,000 1,400
2019 18,000 2,000
2020 24,000 3,000
2021 30,000
2022 33,000
REQUIRED
Prepare the following accounts:
(i) Royalties payment Account
(ii) Royalties Receivable Account
(iii) Short workings Account (tenant)
(iv) Sub-tenant Account
(v) Short-working (sub-tenant)
