Exercise 12-16 (Part Level Submission) Leontyne Price Company from time to time
ID: 2476157 • Letter: E
Question
Exercise 12-16 (Part Level Submission) Leontyne Price Company from time to time embarks on a research program when a special project seems to offer possibilities. In 2013, the company expends $336,410 on a research project, but by the end of 2013 it is impossible to determine whether any benefit will be derived from it. Collapse question part (b) The project is completed in 2014, and a successful patent is obtained. The R&D costs to complete the project are $127,020. The administrative and legal expenses incurred in obtaining patent number 472-1001-84 in 2014 total $26,000. The patent has an expected useful life of 5 years. Record these costs in journal entry form. Also, record patent amortization (full year) in 2014. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit (To record research and development costs) (To record legal and administrative costs) (To record one year’s amortization expense)
Explanation / Answer
Research and Development Expenses $336,410 in the Income Statement.
Research and development expenses 1,27,020
Accounts payable 1,27,020
Patents 26,000
Cash(assume expense paid in cash) 26,000
Patent Expense (Amortization of Patents) 5200
Patents 5200
R &D still has to be expensed straight line over 5 years.
Legal costs can be capitalized.
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