Faculty of Commerce

School of Commerce

Class: F.Y.B.Com.(Hons.)
Subject: SOC2007A Advanced Financial Accounting
Date of Submission: 13 December 2021
Marks: 15
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Canon Ltd. is famous for printing and xerox machines. Boro Lld. is a
Mumbai based company wished to expand their business at Pune as a
supplier of study material for maximum possible courses. The
management of a company approached Canon Ltd. with a business
proposal. A lease agreement was signed between both the companies
mentioning that the lessor grated a special permission to manufacture
and sell the machine by issuing a license to Boro Lld. for five years
from year 2011.The terms and the conditions incorporated in the
contract were as follows.
a) For the first year rock rent was fixed at Rs. 60,000 with an annual
increment of Rs. 4,000 in every subsequent year.
b) The rate of Royalty was fixed at Rs. 800 per machinery sold.
c) A special provision was made to recover short working in first four years
only.
d) The number of machineries manufactured and sold were as follows
Year Opening Machines Closing
Machines Manufactured Machines
2011 0 150 50
2012 50 200 110
2013 110 250 160
2014 160 200 120
2015 120 180 120
What are your observation about the manufacturing strategies of the
company? How these transactions can be journalized and recorded in
ledgers of both the companies?

Q.2 B Ltd. got the lease of a colliery on 1 st January, 2015 on the basis of
Rs.0.5 per tonne of coal raised subject to a dock rent of Rs.20000 p.a. the
lessee has the right to recover the short workings during first four years of
the lease only. The output was as follows:

Year Output (Tonnes)

2015 18,000
2016 30,000
2017 60,000
2018 80,000
2019 1,00,000

As a commerce student update the books of accounts with the proper

accounting processes and give the justification for the records maintained.

Q.3 Banerji, a renowned author wrote a book on Financial Accounting

and gave the right of its publication to Aarohi Ltd., Ajmer at a royalty of
20% on the published price of the copies sold with a minimum rent of
RS.20000 p.a. The published price of the book is Rs.100/. the amount of
royalty is to be paid at the close of the accounting year on 31 st December.
Banerji submits the following additional information:

Year Number of Copies Specime Closing

copies printed Damaged n copies stock
given
2016 1000 12 88 300
2017 15000 14 186 700
2018 1000 8 92 300
2019 1500 10 90 600
Prepare the required accounts in the books of lessee with the condition
that shortworkings can be recovered in the first three years of the royalty
agreement.

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