Question
Ten years ago, Mobiletex Ltd. Leased a patent for the manufacture of a gadget used in mobile phones from Quickcom Ltd. The lease agreement provided
Ten years ago, Mobiletex Ltd. Leased a patent for the manufacture of a gadget used in mobile phones from Quickcom Ltd.
The lease agreement provided for payment of royalty at the rate of Sh.70 per gadget produced with a minimum royalty of Sh.450,000 per annum.Royalties were payable on 15 March following the end of the financial year on 31 December.Short workings arising in any year were recoverable within the following two years of operations.
Mobiletex Ltd. Sub-leased the patent to Handphone Ltd. at a royalty of Sh.90 per gadget sold with a minimum rent payment of Ksh 120,000 royalties are payable at the end of each financial year on 31 December.
Given below is information about the number of gadgets produced by both companies in the first five years of operation.
Year ended
31 December
Mobiletex Ltd.
Mobile Ltd.
Production
(units)
Sales
(units)
Production
(units)
Sales
(units)
2007
2008
2009
2010
2011
2,800
4,500
5,500
5,200
7,000
1,600
2,600
3,600
4,000
5,000
800
1,100
3,000
3,900
4,200
500
1,200
2,500
4,200
4,000
Required:
Prepare ledger accounts in the books of the tenant
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Answer To prepare the ledger accounts in the books of the tenant Mobiletex Ltd we need to calculate ...Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started