Principles of Accounting
12th Edition
ISBN: 9781285607047
Author: NEEDLES
Publisher: Cengage Learning
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Chapter 3, Problem 7EA
1.
To determine
Compute the royalty expense for K Company and the royalty income for L Company.
2.
To determine
Pass necessary
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Moretti Company produces computer software that Fossil Company sells. Moretti receives a royalty of 15 percent of sales. Fossil pays royalties to Moretti semiannually—on May 1 for sales made in July through December of the previous year and on November 1 for sales made in January through June of the current year. Royalty expense for Fossil and royalty income for Moretti in the amount of $6,000 were accrued on December 31, 2013. Cash in the amounts of $6,000 and $10,000 was paid and received on May 1 and November 1, 2014, respectively. Software sales during the July to December 2014 period totaled $150,000.
1.Calculate the amount of royalty expense for Fossil and royalty income for Moretti during 2014.
2.Record the adjusting entry that each company made on December 31, 2014.
During 2018, a textbook written by Mercer Co. personnel was sold to Roark Publishing, Inc., for royalties of 10% on sales. Royalties are receivable semiannually on March 31, for sales in July through December of the prior year, and on September 30, for sales in January through June of the same year.
- Royalty income of $108,000 was accrued at 12/31/18 for the period July-December 2018.
- Royalty income of $120,000 was received on 3/31/19, and $156,000 on 9/30/19.
- Mercer learned from Roark that sales subject to royalty were estimated at $1,620,000 for the last half of 2019.
In its income statement for 2019, Mercer should report royalty income at
Three programmers at Feenix Computer Storage, Inc., write an operating systems control manual for Hill-McGraw Publishing, Inc., for which Feenix receives royalties equal to 12% of net sales. Royalties are payable annually on February 1 for sales the previous year. The editor indicated to Feenix on December 31, 2021, that book sales subject to royalties for the year just ended are expected to be $220,000. Accordingly, Feenix accrued royalty revenue of $26,400 at December 31 and received royalties of $26,820 on February 1, 2022. What adjustments, if any, should be made to retained earnings or to the 2021 financial statements?
Chapter 3 Solutions
Principles of Accounting
Ch. 3 - Prob. 1DQCh. 3 - Will the carrying value of a long-term asset...Ch. 3 - If, at the end of the accounting period, you were...Ch. 3 - Prob. 4DQCh. 3 - Prob. 5DQCh. 3 - Prob. 6DQCh. 3 - Match the concepts of accrual accounting that...Ch. 3 - The Prepaid Insurance account began the year with...Ch. 3 - The Supplies account began the year with a balance...Ch. 3 - Prob. 4SE
Ch. 3 - Prob. 5SECh. 3 - During the month of August, deposits in the amount...Ch. 3 - Prob. 7SECh. 3 - Malesherbes Companys adjusted trial balance on...Ch. 3 - Prob. 9SECh. 3 - Prob. 10SECh. 3 - Carlos Companys accountant makes the assumptions...Ch. 3 - Four conditions must be met before revenue should...Ch. 3 - Prob. 3EACh. 3 - Prob. 4EACh. 3 - Prob. 5EACh. 3 - Prob. 6EACh. 3 - Prob. 7EACh. 3 - Prob. 8EACh. 3 - Prepare year-end adjusting entries for each of the...Ch. 3 - Prob. 10EACh. 3 - Prob. 11EACh. 3 - Wipro Companys income statement included the...Ch. 3 - At the end of the first three months of operation,...Ch. 3 - On November 30, the end of the current fiscal...Ch. 3 - Kinokawa Consultants Companys trial balance on...Ch. 3 - Hertz Limo Service was organized to provide...Ch. 3 - At the end of its fiscal year, Berwyn Cleaners...Ch. 3 - Brave Advisors Services trial balance on December...Ch. 3 - Prob. 7PCh. 3 - Prob. 8PCh. 3 - Prob. 9APCh. 3 - On March 31, the end of the current fiscal year,...Ch. 3 - Lee Technology Corporations trial balance on...Ch. 3 - Prob. 12APCh. 3 - Prob. 13APCh. 3 - Scoop Consulting Services trial balance on...Ch. 3 - Prob. 15APCh. 3 - Prob. 16APCh. 3 - Never Flake Company provided a rust-prevention...Ch. 3 - Prob. 2CCh. 3 - Prob. 3CCh. 3 - Prob. 4CCh. 3 - Prob. 5CCh. 3 - Prob. 6C
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