Decker Company assigns some of its patents to other enterprises under a variety

Question

Decker Company assigns some of its patents to other enterprises under a variety of licensing agreements. In some instances advance royalties are received when the agreements are signed, and in others, royalties are remitted within sixty days after each license year-end. The following data are included in Decker's December 31 balance sheet: During 2016 Decker received royalty remittances of $200,000. In its income statement for the year ended December 31, 2016, Decker should report royalty income of: a) $195,000 b) $235,000 c) $220,000 d) $205,000 e) $165,000

Explanation / Answer

Solution.

Calculation of roylties income.

Roylties receivable =

2015 = 90,000

2016 = 75,000

Unearned Royalties =

2015 = 60,000

2016 = 40,000

Royalties recived in 2016 = $200,000

= 185,000 + 20,000 = $205,000

Answer D is right.

After analyzing the t-account of 185,000 debit show royalties receiveable iis revenue earned.And 20,000 decrese in unearned royalties shhows 2016 royalties revenue ( 185,000 + 20,000 = $205,000).

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