SM Company acquired rights to a patent under a licensing agreement that required an advance royalty payment when the agreement was signed. The entity remitted royalties earned and due under the agreement on October 31 each year. Additionally, on the same date, the entity paid, in advance, estimated royalties for the next year. The entity adjusted prepaid royalties at the end of the year. The entity provided the following information for the year ended December 31, 2020:   1/1  Prepaid royalties  P 650,000 10/31 Royalty payment (charged to royalty expense) 1,100,000 12/31 Year-end credit adjustment to expense250,000   On December 31, 2020, what amount should be reported as prepaid royalties?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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SM Company acquired rights to a patent under a licensing agreement that required an advance royalty payment when the agreement was signed. The entity remitted royalties earned and due under the agreement on October 31 each year. Additionally, on the same date, the entity paid, in advance, estimated royalties for the next year. The entity adjusted prepaid royalties at the end of the year. The entity provided the following information for the year ended December 31, 2020:
 
1/1  Prepaid royalties  P 650,000
10/31 Royalty payment (charged to royalty expense) 1,100,000
12/31 Year-end credit adjustment to expense250,000
 
On December 31, 2020, what amount should be reported as prepaid royalties?
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