Question 2 Ott Company acquired rights to a patent from Grey under a licensing agreement that required an advance royalty payment when the agreement was signed. Ott remits royalties earned and due under the agreement on October 31 each year. Additionally, on the same date, Ott pays, in advance, estimated royalties for the next year. Ott adjusts prepaid royalties at year-end. Information for the year ended December 31, year 2, is as follows: Date January 1, year 2 Prepaid royalties Amount $ 65,000 October 31, year 2 Royalty payment (charged to royalty expense) 120,000 In its December 31, year 2 balance sheet, Ott should report prepaid royalties of $100,000. $55,000. $85,000. $65,000.
Question 2 Ott Company acquired rights to a patent from Grey under a licensing agreement that required an advance royalty payment when the agreement was signed. Ott remits royalties earned and due under the agreement on October 31 each year. Additionally, on the same date, Ott pays, in advance, estimated royalties for the next year. Ott adjusts prepaid royalties at year-end. Information for the year ended December 31, year 2, is as follows: Date January 1, year 2 Prepaid royalties Amount $ 65,000 October 31, year 2 Royalty payment (charged to royalty expense) 120,000 In its December 31, year 2 balance sheet, Ott should report prepaid royalties of $100,000. $55,000. $85,000. $65,000.
Financial Accounting Intro Concepts Meth/Uses
14th Edition
ISBN:9781285595047
Author:Weil
Publisher:Weil
Chapter8: Revenue Recognition, Receivables, And Advances From Customers
Section: Chapter Questions
Problem 21E
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Transcribed Image Text:Question 2
Ott Company acquired rights to a patent from Grey under a licensing agreement that required an advance
royalty payment when the agreement was signed. Ott remits royalties earned and due under the agreement
on October 31 each year. Additionally, on the same date, Ott pays, in advance, estimated royalties for the
next year. Ott adjusts prepaid royalties at year-end. Information for the year ended December 31, year 2, is
as follows:
Date
January 1, year 2 Prepaid royalties
Amount
$ 65,000
October 31, year 2 Royalty payment (charged to royalty expense) 120,000
In its December 31, year 2 balance sheet, Ott should report prepaid royalties of
$100,000.
$55,000.
$85,000.
$65,000.
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