Calculate the amount of royalty expense

Assignment Help Accounting Basics

Reference no: EM132700473

Question - Elisa Diaz Company produces computer software that Batangas Company sells. Diaz receives a royalty of 15% of sales. Batangas Company pays royalties to Diaz Company on a semi-annual basis- 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 Batangas Company and royalty income for Diaz Company in the amount of P600,000 were accrued on December31, 2010. Cash in the amounts of P600,000 and P1,000,000 was paid and received on May 1 and Nov 1, 2011, respectively. Software sales during the July to December 2011 period totaled P15,000,000.

Required -

1. Calculate the amount of royalty expense for Batangas Company and royalty income for Diaz during 2011.

2. Record the adjusting entry that each company made on December 31, 2011.

Reference no: EM132700473

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