Question

On February 12, Goal Publishing, Inc., purchased the copyright to a book for $15,000 and agreed to pay royalties equal to 10% of book sales, with a guaranteed minimum royalty of $60,000. Goal had book sales of $750,000 during the year. In its income statement, what amount should Goal report as royalty expense for the year
1. $ 60 000
2. $ 75 000
3. $ 76000
4. $ 90000

Answer 1

Answer:

option 2 $75,000

Explanation:

Data provided in the question:

Amount for which the copyright to a book purchased = $15,000

Agreed royalty = 10% of the book sales

Minimum royalty to be paid= $60,000

Total book sales = $750,000

Now,

The Amount of royalty according to the agreement

= 10% of Total book sales

= 10% of $750,000

= $75,000

Since,

The amount the greater than the minimum royalty

Hence,

the agreement amount will be paid

i.e

option 2 $75,000