Why babariga acquired the rights to run a quarry
Course:- Accounting Basics
Reference No.:- EM13505155

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Babariga acquired the rights to run a quarry from a parcel of land owned by Ajonibode.

The agreement provided for:

(a) Payment of royalty of N40 per tonne of granite quarried.

(b) A minimum payment of N2 million per annum.

(c) Recoupment rights (for short workings) to be extinguished at the end of the third year.


During the first four years of the contract, the following quantities of granite were produced:











Babariga's accounting year ends on 31 December and payment to Ajonibode is made on the 1 January following the year end.

You are required to prepare:

(i) The Royalty Accounts.

(ii) Ajonibode Accounts.

(iii) The Short Working Recoverable Account.

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