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 Ju through December of the prior year. Sales of the manual began in July 2020, and Dreighton accrued royalty revenue of $41,400 at December 31, 2020, as follows: Receivable-royalty revenue Royalty revenue 41,400 41,400 Dreighton received royalties of $49,000 on April 1, 2021, and $53,000 on October 1, 2021. Irving indicated to Dreighton on Decembe 31 that book sales subject to royalties for the second half of 2021 are expected to be $630,000. Required: 1. & 2. Prepare any necessary journal entry related to royalty revenue for 2021 and record adjustment, if any, made to retained earnings in the 2020 financial statements. (If no entry is required for a transaction/event, select "No journal entry required" in the

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 Ju through December of the prior year. Sales of the manual began in July 2020, and Dreighton accrued royalty revenue of $41,400 at December 31, 2020, as follows: Receivable-royalty revenue Royalty revenue 41,400 41,400 Dreighton received royalties of $49,000 on April 1, 2021, and $53,000 on October 1, 2021. Irving indicated to Dreighton on Decembe 31 that book sales subject to royalties for the second half of 2021 are expected to be $630,000. Required: 1. & 2. Prepare any necessary journal entry related to royalty revenue for 2021 and record adjustment, if any, made to retained earnings in the 2020 financial statements. (If no entry is required for a transaction/event, select "No journal entry required" in the

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter17: Advanced Issues In Revenue Recognition

Section: Chapter Questions

Problem 6P

See similar textbooks

Similar questions

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.…
Mattson 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…
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
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.
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?
During 2020, a textbook written by Sandhill Co. personnel was sold to Sandra Publishing, Inc., for royalties of 5% 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 $243000 was accrued at 12/31/20 for the period July-December 2020. • Royalty income of $140000 was received on 3/31/21, and $411000 on 9/30/21. • Sandhill learned from Sandra that sales subject to royalty were estimated at $4210000 for the last half of 2021. In its income statement for 2021, Sandhill should report royalty income at $182500. $621500. $518500. $551000.
Magenta 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.
Ferol 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 1,260,000
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.
Tamarisk 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…
ABC Company sells equipment service contracts that cover 2-year period. The sales price of each contract is P 5,000. ABC past experience shows that of the total pesos spent for repairs in service contracts, 40% is incurred evenly during the first contract year and 60% evenly during the second contract year. ABC sold 1,000 contracts evenly throughout 2018 and 800 evenly throughout 2019. In its December 31,2018 statement of financial position, what amount should ABC report as unearned revenue?
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…