Problem: Swan Company produces computer software that is sold by Celestial Systems Company. Swan receives a royalty of 15 percent of sales. Royalties are paid by Celestial Systems and received by swan semiannually on May 1 for sales made July through December of the previous year and on November 1 for sales made January through June of the current year. Royalty expense for Celestial Systems and royalty income for Swan in the amount of 12,000 were accrued on December 31, 20x2. Cash in the amounts of $12,000 and $20,000 was paid and received on May 1 and November 1, 20x3, respectively. Software sales during the July to December 20x3 period totaled $300,000.
Question 1: Calculate the amount of royalty expense for Celestial Systems and royalty income for Swan during 20x3.
12,000
12,000
20,000
44,000
Question 2: Record the appropriate adjusting entry made by each company on December 31, 20x3
|
Date
|
Item
|
Post.
Ref.
|
Debit
|
Credit
|
|
31
|
Royalty Payment
|
|
44,000
|
|
|
|
Cash
|
|
|
44,000
|
|
|
|
|
|
|
|
Date
|
Item
|
Post.
Ref.
|
Debit
|
Credit
|
|
31
|
Royalty Payment
|
|
|
44,000
|
|
|
Cash
|
|
44,000
|
|
|
|
|
|
|
|