During 2010, George Winston Corporation spent $179,220 in research and developme
ID: 2447966 • Letter: D
Question
During 2010, George Winston Corporation spent $179,220 in research and development costs. As a result, a new product called the New Age Piano was patented. The patent was obtained on October 1, 2010, and had a legal life of 20 years and a useful life of 10 years. Legal costs of $31,800 related to the patent were incurred as of October 1, 2010. Prepare all journal entries required in 2010 and 2011 as a result of the transactions above.
Date
Account Titles and Explanation
Debit
Credit
2010
(To record research and development expenses)
2010
(To record legal expenses)
2010
(To record amortization expense)
2011
Date
Account Titles and Explanation
Debit
Credit
2010
(To record research and development expenses)
2010
(To record legal expenses)
2010
(To record amortization expense)
2011
Explanation / Answer
Date Account Title & Explanation Debit Credit 2010 Intangible Asset (R & D Expense) $179220 Cash/Bank/Account Payables $179220 Being patent R & D expenses capitalised 2010 Intangible Asset (Legal Expenses) $31800 Cash/Bank/Account Payables $31800 Being patent Legal expenses capitalised 2010 Amortization A/c $10551 Intangible Asset $10551 Intangile asset is to be amortised over its useful life of 10 year.As it is put to use on 1st Oct 2010 , amortisation cost considered only for 6 months ($211020 / 10 year = $21102 per year) Amortisation exp. debited to Profit & loss account 2011 Amortization A/c $21102 Intangible Asset $21102 Amortisation exp. debited to Profit & loss account
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