Principles of Accounting
12th Edition
ISBN: 9781133626985
Author: Belverd E. Needles, Marian Powers, Susan V. Crosson
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Videos
Question
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
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
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 forHill-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, 2016,that book sales subject to royalties for the year just ended are expected to be $300,000. Accordingly, Feenixaccrued royalty revenue of $36,000 at December 31 and received royalties of $36,500 on February 1, 2019.What adjustments, if any, should be made to retained earnings or to the 2016 financial statements? Explain.
Dreighton Engineering Group receives royalties on a technical manual written by two of its engineers and sold to William B. Irving Publishing, Inc. Royalties are 10% of net sales, receivable on October 1 for sales in January through June and on April 1 for sales in July through December of the prior year. Sales of the manual began in July 2015, and Dreighton accrued royalty revenue of $31,000 at December 31, 2015, as follows: Receivable—royalty revenue .............................................................................. 31,000 Royalty revenue ............................................................................................... 31,000 Dreighton received royalties of $36,000 on April 1, 2016, and $40,000 on October 1, 2016. Irving indicated to Dreighton on December 31 that book sales subject to royalties for the second half of 2016 are expected to be $500,000. Required: 1. Prepare any journal entries Dreighton should record during 2016 related to the royalty revenue.…
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
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- 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?arrow_forwardMattson Company receives royalties on a patent It developed several years ago. Royalties are 4% of net sales, to be received on September 30 for sales from January through June and receivable on March 31 for sales from July through December. The patent rights were distributed on July 1, 2023, and Mattson accrued royalty revenue of $57,000 on December 31, 2023, as follows: General Journal Receivable-royalty revenue Royalty revenue 57,000 Mattson received royalties of $61,700 on March 31, 2024, and $77,000 on September 30, 2024. In December, 2024, the patent user Indicated to Mattson that sales subject to royalties for the second half of 2024 should be $770,000. View transaction list Required: 1. Prepare any Journal entries Mattson should record during 2024 related to the royalty revenue. Note: If no entry is required for a transaction/event, select "No Journal entry required" in the first account field. Journal entry worksheet < Debit 57,000 1 2 3 Credit Record the entry related to the…arrow_forwardTamarisk Company, which began operations at the beginning of 2018, produces various products on a contract basis. Each contract generates a gross profit of $85,000. Some of Tamarisk’s contracts provide for the customer to pay on an installment basis. Under these contracts, Tamarisk collects one-fifth of the contract revenue in each of the following four years. For financial reporting purposes, the company recognizes gross profit in the year of completion (accrual basis). For tax purposes, Tamarisk recognizes gross profit in the year cash is collected (installment basis).Presented below is information related to Tamarisk’s operations for 2020: 1. In 2020, the company completed seven contracts that allow for the customer to pay on an installment basis. Tamarisk recognized the related gross profit of $595,000 for financial reporting purposes. It reported only $119,000 of gross profit on installment sales on the 2020 tax return. The company expects future collections on the related…arrow_forward
- Oriole Company, which began operations at the beginning of 2018, produces various products on a contract basis. Each contract generates a gross profit of $82,000. Some of Oriole’s contracts provide for the customer to pay on an installment basis. Under these contracts, Oriole collects one-fifth of the contract revenue in each of the following four years. For financial reporting purposes, the company recognizes gross profit in the year of completion (accrual basis). For tax purposes, Oriole recognizes gross profit in the year cash is collected (installment basis).Presented below is information related to Oriole’s operations for 2020: 1. In 2020, the company completed seven contracts that allow for the customer to pay on an installment basis. Oriole recognized the related gross profit of $574,000 for financial reporting purposes. It reported only $114,800 of gross profit on installment sales on the 2020 tax return. The company expects future collections on the related installment…arrow_forwardPeokz Co pays royalties to writers annually, in February, the payment covering the previous calendar year. Ae at the end of December 20X2, Bookz Co had accrued $100,000 in royalties due to writers. However a check of the royalty calculation performed in January 20X3 established that the actual figure due to be paid by Bookz Co to writers was $150,000. Before this under-accrual was discovered, Bookz Co's draft statement of profit or loss for the accounting vear ended 31 December 20X2 showed a profit of $125,000 and their draft statement of financial position showed net assets of $375,000. What will Bookz Co's profit and net asset position be after an entry to correct the under-accrual has been processed? Profit for the year Net asset position $175,000 $125,000 $75,000 $25,000 $425,000 $375,000 $325,000 $225,000 Carrow_forwardFerol Company acquired rights to a patent from Rachal Company requiring an advance royalty payment when agreement was signed. Ferol Company remits royalties earned and due under the agreement on October 31 each year. Additionally, on the same date, Ferol Company pays in advance estimated royalties for the next year. Ferol Company adjusts prepaid royalties at year-end. Information for the year ended December 31, 2021 is as follows: 01/01/2021 Prepaid royalties 75,000 10/31/2021 Royalty payment (charged to royalty expense) 1,350,000 12/31/2021 Year-end credit adjustment to royalty expense 165,000 Under the cash basis of accounting, Ferol Company’s royalty expense for 2021 is Group of answer choices 1,185,000 1,255,000 1,350,000 1,260,000arrow_forward
- Johnson Company receives royalties on a patent it developed several years ago. Royalties are 5% of net sales, to be received on September 30 for sales from January through June and receivable on March 31 for sales from July through December. The patent rights were distributed on July 1, 2020, and Johnson accrued royalty revenue of $50,000 on December 31, 2020, as follows: Receivable-royalty revenue Royalty revenue 50,000 Required: 50,000 Johnson received royalties of $65,000 on March 31, 2021, and $90,000 on September 30, 2021. December, 2021, the patent user indicated to Johnson that sales subject to royalties for the second half of 2021 should be $600,000. Prepare any journal entries Johnson should record during 2021 related to the royalty revenue.arrow_forwardSunland AG, which began operations at the beginning of 2020, produces various products on a contract basis. Each contract generates income of €78,000. Some of Sunland’s contracts provide for the customer to pay on an installment basis. Under these contracts, Sunland collects one-fifth of the contract revenue in each of the following 4 years. For financial reporting purposes, the company recognizes income on an accrual basis; for tax purposes, Sunland recognizes income in the year cash is collected (installment basis).Presented below is information related to Sunland’s operations for 2022. 1. In 2022, the company completed seven contracts that allow for the customer to pay on an installment basis. Sunlandrecognized the related income of €546,000 for financial reporting purposes. It reported only €109,200 of income on installment sales on the 2022 tax return. The company expects future collections on the related installment receivables to result in taxable amounts of €109,200 in…arrow_forwardOn May 3, 2020, Vaughn Company consigned 90freezers, costing $470each, to Remmers Company. The cost of shipping the freezers amounted to $870and was paid by Vaughn Company. On December 30, 2020, a report was received from the consignee, indicating that45freezers had been sold for $750each. Remittance was made by the consignee for the amount due after deducting a commission of6%, advertising of $180, and total installation costs of $310on the freezers sold. (Round answers to O decimal places, e.g. 5,275.) (a) Compute the inventory value of the units unsold in the hands of the consignee. Inventory value $ (b) Compute the profit for the consignor for the units sold. Profit on consignment sales $ (c) Compute the amount of cash that will be remitted by the consignee. Remittance from consignee $arrow_forward
- On May 3, 2020, Sage Company consigned 80 freezers, costing $ 500 each, to Remmers Company. The cost of shipping the freezers amounted to $ 920 and was paid by Sage Company. On December 30, 2020, a report was received from the consignee, indicating that 40 freezers had been sold for $810 each. Remittance was made by the consignee for the amount due after deducting a commission of 5%, advertising of $ 220, and total installation costs of $ 300 on the freezers sold. (Round answers to O decimal places, e.g. 5,275.) (a) Compute the inventory value of the units unsold in the hands of the consignee. Inventory value %24 20460 (b) Compute the profit for the consignor for the units sold. Profit on consignment sales %24 10260 (c) Compute the amount of cash that will be remitted by the consignee. Remittance from consignee %24 30260arrow_forwardMagenta Company purchased a machine from Pink Corporation on October 31, 2021. In payment for the $288,000 purchase, Magenta issued a one-year installment note to be paid in equal monthly payments of $25,588 at the end of each month. The payments include interest at the rate of 12%. The amount of interest expense that Magenta will report in its income statement for the year ended December 31, 2021, is: A. $2,559. B. $2,880. C. $5,533. D. $5,760.arrow_forwardWhit corporation sells washing machine that carry a three year warranty against manufacturer's defect. The company assures that the product will function as intended based on agreed -upon specification. Based on the industry experience, waarranty costs were estimated at P300 per machine. During 2022, Whit sold 24,000 washing machines and paid warranty coss of 1,700,000. In its profit or loss statement for the year ended December 31,2022. Whit should report warranty expense of?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,
Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSON
Intermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill Education
Financial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education
Revenue recognition explained; Author: The Finance Storyteller;https://www.youtube.com/watch?v=816Q6pOaGv4;License: Standard Youtube License