You are the bookkeeper for a video game company. Your company recently licensed one of its new games to a distributor. The distributor paid your company $4,000 at the contract signing as an advanced royalty for the first 500 games sold and will pay $8 for each game sold after. Which best describes the effect of Royalty Income on the accounting equation? 

Royalty Income has no effect on the accounting equation. 

Royalty Income increases liabilities. 

Royalty Income increases equity. 

Royalty Income decreases assets