Cost of a Copyright
Response to the following problem:
The Gansac Publishing Company signed a contract with an author to publish her book. The signing took place on January 1, 2010, and a payment of $20,000 was made. The agreement was that the author would receive 10% of the selling price of $10 per book. The company expects sales of the book to be 100,000 copies in 2010, 80,000 in 2011, and 20,000 in 2012. It incurred production costs of $800,000 for 200,000 copies during 2010.
Required
1. Prepare journal entries to record the preceding events during 2010 and 2011, assuming that sales were as projected.
2. How would your answer change if the projected sales were considered to be "probable"?