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

Answer 1

Answer:

$75,000

Explanation:

The computation of the amount reported as a royalty expense is given below:

There is a guaranteed minimum royalty of $60,000

And the 10% of book sales is $75,000

So the amount that should be reported as a royalty expense would be higher of the two amount i.e. $75,000

Therefore the same is relevant