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.
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
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