John Pickens writes mystery novels. His publisher pays him royalties for books sold each year. He is paid royalties for the first half of the year on September 30 and the second half of the year on March 31 of the following year. He received $42,000 in September, 2016. The publisher estimated that his royalties for the second half of the year would be $53,000. On March 31, 2017, he received
$57,500. Assuming that he recorded $53,000 at December 31, 2016, which one of the following is the correct journal entry on March 31, 2017? His tax rate is 35%.
A)
Account
Debit
Credit
Cash
57,500
Royalties Receivable
53,000
Royalty Revenue 4,500
B)
Account
Debit
Credit
Cash
57,500
Royalty Revenue 57,500
C)
Account
Debit
Credit
Cash
57,500
Royalties Receivable
53,000
Retained Earnings 4,500
D)
Account
Debit
Credit
Cash
57,500
Royalties Receivable
53,000
Retained Earnings 2,925
Income Taxes Payable 1,575
Answer: A
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a. true b. false
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