Question

Dreighton Engineering Group receives royalties on a technical manual written by two of its engineers and sold to William B. Irving Publishing, Inc. Royalties are 10% of net sales, receivable on October 1 for sales in January through June and on April 1 for sales in July through December of the prior year. Sales of the manual began in July 2020, and Dreighton accrued royalty revenue of $31,000 at December 31, 2020, as follows:

Receivable—royalty revenue	31,000
Royalty revenue		31,000

   
Dreighton received royalties of $36,000 on April 1, 2021, and $40,000 on October 1, 2021. Irving indicated to Dreighton on December 31 that book sales subject to royalties for the second half of 2021 are expected to be $500,000.

Required:
1. & 2. Prepare any necessary journal entry related to royalty revenue for 2021 and record adjustment, if any, made to retained earnings in the 2020 financial statements. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Record collection of royalties. April 2021
Record collection of royalties. October 2021

Record year end adjustment for royalties. DEc 2021

Prepare any necessary journal entry to adjust retained earnings in the 2020 financial statements. Dec 2020

Answer 1

Answer :-

Journal entries

	Date	account title	Debit	Credit
1.	April 01,2021	Cash	$36,000
		Receivable-royalty revenue		$31,000
		Royalty revenue		$5,000
		(To record collection of royalty)
2.	Oct 01,2021	Cash	$40,000
		Royalty revenue		$40,000
		(To record collection of royalty)
3.	Dec 31,2021	Receivable-royalty revenue	$50,000
		Royalty revenue(500,000×10%)		$50,000
		(To record year end adjustment for royalties)
4.	Dec 31,2020	No Journal Entry Required