Schuss Company produces computer software that Dushan Comp, Inc.

sells. Schuss receives a royalty of 15 percent of sales. Dushan Comp pays royalties to Schuss Company semiannually—on May 1 for sales made in July through December of the previous year and on November 1 for sales made in January through June of the current year. Royalty expense for Dushan Comp and royalty income for Schuss Company in the amount of $6,000 were accrued on December 31, 20x5. Cash in the amounts of $6,000 and $10,000 was paid and received on May 1 and November 1, 20x6, respectively. Software sales during the July to December 20x6 period totaled $150,000.
1. Calculate the amount of royalty expense for Dushan Comp and royalty income for Schuss during 20x6.
2. Record the adjusting entry that each company made on December 31, 20x6.
Preparation of Financial Statements