John Pickens Writes Mystery Novels B) $$\begin{array} { | l | r | r | } \hline \text { Cash } & 59,000 & \\\hline \text { Royalty Revenue } & & 59,000 \\\hline\end{array}$$

question 39

Multiple Choice

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, 2018. The publisher estimated that his royalties for the second half of the year would be $52,000. On March 31, 2019, he received $59,000. Assuming that he recorded $52,000 at December 31, 2018, which one of the following is the correct journal entry on March 31, 2019? His tax rate is 35%.

• A) \[\begin{array} { | l | r | r | }
• \hline \text { Cash } & 59,000 & \\
• \hline \text { Royalties Receivable } & & 52,000 \\
• \hline \text { Royalty Revenue } & & 7000 \\
• \hline
• \end{array}\]
• B) \[\begin{array} { | l | r | r | }
• \hline \text { Cash } & 59,000 & \\
• \hline \text { Royalty Revenue } & & 59,000 \\
• \hline
• \end{array}\]
• C) \[\begin{array} { | c | r | r | }
• \hline \text { Cash } & 59,000 & \\
• \hline \text { Royalties Receivable } & & 52,000 \\
• \hline \text { Retained Earnings } & & 7000 \\
• \hline
• \end{array}\]
• D) \[\begin{array} { | l | r | r | }
• \hline \text { Cash } & 59,000 & \\
• \hline \text { Royalties Receivable } & & 52,000 \\
• \hline \text { Retained Earnings } & & 4550 \\
• \hline \text { Income Taxes Payable } & & 2450 \\
• \hline
• \end{array}\]

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Definitions:

Capital Budgeting

Involves analyzing potential investments and projects for their future cash flows and profitability to ensure they align with overall company goals and financial strategies.

Cash Flows

The total amount of money being transferred into and out of a business, especially affecting its liquidity.

NPV Profiles

Graphical representations showing the relationship between a project's Net Present Value (NPV) and various discount rates.

Mutually Exclusive

Situations or events that cannot occur at the same time or cannot both be true or exist simultaneously.