Dreighton Engineering Group receives royalties on a technical manual written by
ID: 2533302 • Letter: D
Question
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 2017, and Dreighton accrued royalty revenue of $42,200 at December 31, 2017, as follows:
Dreighton received royalties of $50,000 on April 1, 2018, and $54,000 on October 1, 2018. Irving indicated to Dreighton on December 31 that book sales subject to royalties for the second half of 2018 are expected to be $640,000.
Required:
1. Prepare any necessary journal entry related to royalty revenue for 2018 and record adjustment, if any, made to retained earnings or to the 2017 financial statements.
Explanation / Answer
Date
Accounts Title & Explanation
Debit
Credit
April 1, 2018
Cash
$50000
Receivable—royalty revenue
$42200
Royalty revenue
$7800
(For recording receipts of royalty)
Oct. 1, 2018
Cash
$54000
Royalty revenue
$54000
(For recording receipts of royalty revenue)
Dec. 31, 2018
Receivable—royalty revenue
$64000
Royalty revenue ($640000 * 10%)
$64000
(For recording royalty revenue on Dec. 31)
Dec. 31, 2017
No Journal Entry Required
Date
Accounts Title & Explanation
Debit
Credit
April 1, 2018
Cash
$50000
Receivable—royalty revenue
$42200
Royalty revenue
$7800
(For recording receipts of royalty)
Oct. 1, 2018
Cash
$54000
Royalty revenue
$54000
(For recording receipts of royalty revenue)
Dec. 31, 2018
Receivable—royalty revenue
$64000
Royalty revenue ($640000 * 10%)
$64000
(For recording royalty revenue on Dec. 31)
Dec. 31, 2017
No Journal Entry Required
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