Question

Decker Company assigns some of its patents to other enterprises under a variety of licensing agreements. In some instances advance royalties are received when the agreements are signed, and in others, royalties are remitted within 60 days after each license year-end. The following data are included in Decker’s December 31 balance sheet:
Year 1 Year 2
Royalties receivable $90,000 $85,000
Unearned royalties 60,000 40,000
During year 2 Decker received royalty remittances of $200,000. In its income statement for the year ended December 31, year 2, Decker should report royalty revenue of
A. $215,000
B. $220,000
C. $195,000
D. $225,000

Answer 1

Answer:

C. $195,000

Explanation:

Royalties Receivable as on 2016              $90,000

Add: Remittance Received                        $200,000

Less: Royalties Receivable as on 2015     $85,000    

Total billed                                                   $205,000

Add: Unearned revenue - Recognized      $60,000

Less: Unearned revenue- Deferred            $70,000

Revenue for 2016                                        $195,000