Reference no: EM132742947

During 2020, a textbook written by Sheridan Co. personnel was sold to Donna Publishing, Inc., for royalties of 5% on sales. Royalties are receivable semiannually on March 31, for sales in July through December of the prior year, and on September 30, for sales in January through June of the same year.

1. Royalty income of $123000 was accrued at 12/31/20 for the period July-December 2020.
2. Royalty income of $330000 was received on 3/31/21, and $291000 on 9/30/21.
3. Sheridan learned from Donna that sales subject to royalty were estimated at $5310000 for the last half of 2021.

Problem 1: In its income statement for 2021, Sheridan should report royalty income at

Option 1: $621000.
Option 2: $763500.
Option 3: $427500.
Option 4: $556500.