Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Elisa Diaz Company produces computer software that Batangas Company sells. Diaz receives a royalty of 15% of sales. Batangas Company pays royalties to Diaz Company

Elisa Diaz Company produces computer software that Batangas Company sells. Diaz receives a royalty of 15% of sales. Batangas Company pays royalties to Diaz

Company on a semi-annual basis - 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 Batangas Company and royalty income for Diaz Company in the amount of P600,000 were accrued on December 31, 2010. Cash in the

amounts of P600,000 and P1,000,000 was paid and received on May 1 and Nov 1, 2011, respectively. Software sales during the July to December 2011 period

totaled P15,000,000.

Required:

1.Calculate the amount of royalty expense for Batangas Company and royalty income for Diaz during 2011.

2.Record the adjusting entry that each company made on December 31, 2011

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Intermediate Accounting

Authors: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella

2nd edition

134730372, 134730370, 978-0134730370

More Books

Students also viewed these Accounting questions