Question

Tolan Corp.'s trademark was licensed to Eddy Co. for royalties of 15% of sales of the trademarked items. Royalties are payable semiannually on March 15 for sales in July through December of the prior year, and on September 15 for sales in January through June of the same year. Tolan received the following royalties from Eddy: March 15 September 15 2013 $5,000 $7,500 2014 6,000 98,500 Eddy estimated that sales of the trademarked items would total $30,000 for July through December 2014. In Tolan's 2014 income statement, the royalty revenue should be _______?

Answer 1

Answer:

In Tolan's 2014 income statement, the royalty revenue should be $103,000.

Explanation:

In Tolan's 2014 income statement the royalty revenue will be royalty for January to June received in September 2014, and for July to December 2014 in March 2015

In the year 2014 received in September 2014 = $98,500 which is for the period Jan to June 2014

Royalty = 15% of sales

Sales estimate for July to December 2014 = $30,000

Royalty = $30,000 X 15% = $4,500

Total royalty income for 2014 = $98,500 received + $4,500 to be received in 2015 Mar 15 = $103,000

In Tolan's 2014 income statement, the royalty revenue should be $103,000.