Question

Lacoma Company produces computer software that Kozuch Company sells. Lacoma receives a royalty of 15 percent of sales. Kozuch pays royalties to Lacoma semiannually—on May 1 for sales made in July through December of the previous year and on November 1 for sales made in January through June of the current year. Royalty expense for Kozuch and royalty income for Lacoma in the amount of $12,000 were accrued on December 31, 2013. Cash in the amounts of $12,000 and $20,000 was paid and received on May 1 and November 1, 2014, respectively. Software sales during the July to December 2014 period totaled $300,000.
1. Calculate the amount of royalty expense for Kozuch and royalty income for Lacoma during 2014.
2. Record the adjusting entry that each company made on December 31, 2014.



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  • CreatedMarch 26, 2014
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