#7) Swan Company produces computer software that is sold by Celestial Systems Company. Swan receives a royalty of 15 % of sales. Royalties are paid by Celestial Systems and received by Swan semiannually on May 1 for sales made July through December of the previous year and on November 1 for sales made January through June of the current year. Royalty expense for Celestial Systems and royalty income for Swan in the amount of $12,000 were accrued on December 31, 20x2. Cash in the same amounts of $12,000 and $20,000 was paid and received on May 1 and November 1, 20x3, respectively. Software sales during the July to December 20x3 period totaled $300,000.
1) Calculate the amount of royalty expense for Celestial Systems and royalty income for Swan during 20x3.
2) Record the appropriate adjusting entry made by each company on December 31, 20x3.
#8 Prepare year-end adjusting entries for each of the following:
1) Office supplies had a balance of $168 on January 1. Purchases debited to office supplies during the year amount to $830. A year-end inventory reveals supplies of $570 on hand.
2) Depreciation of office equipment is estimated to be $4,260 for the year.
3) Property taxes for six months, estimated at $1,750, have accrued but have not been recorded.
4) Unrecorded interest receivable on U.S. government bonds is $1,700.
5) Unearned Revenue has a balance of $1,800. Services for $600 received in advance have not been performed.
6) Services totaling $400 have been performed; the customer has not been billed.
#9 Hiski Jurgen, a lawyer, was paid $72,000 on April 1 to represent a client in certain real estate negotiations over the next 12 months.
1) Record the entries required in Jurgens records on April 1 and at the end of the year, December 31.
2) How would this transaction be reflected on the income statement and balance sheet on December 31?
Solution to your three questions is provided in a separate excel file attached herewith. Necessary workings-calculations are given just below the related entries where required. Necessary explanation is provided.Please note that all entries required in question No 7 are given and the entry actually you require i.e. adjustment entry is given in light yellow shaded form at the end in each section. Extra entries are provided just to enable you to understand complete accounting procedure.