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
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
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
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
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