During 2010, George Winston Corporation spent $178,940 in research and developme

Question

During 2010, George Winston Corporation spent $178,940 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 $34,080 related to the patent were incurred as of October 1, 2010.

(a)

Prepare all journal entries required in 2010 and 2011 as a result of the transactions above.

Date

Account Titles and Explanation

Debit

Credit

2010

2010

2010

2011

During 2010, George Winston Corporation spent $178,940 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 $34,080 related to the patent were incurred as of October 1, 2010.

Explanation / Answer

Account Titles and Explanation

Note:It is assumed that the company is following calendar year.

Journal entries in 2010 and 2011 Date

Account Titles and Explanation

Debit Credit 2010 Patent A/c Dr $178,940 To Bank A/c $178,940 (Being research and development cost capitalised) 2010 Patent A/c Dr $34,080    To Bank A/c $34,080 (Being legal expenses capitalised) 2010 Amorisation expensesA/c Dr $5,325.5 To patent A/c(213020/10)*(3months/12months) $5,325.5 (Being amortisation expenses charged to profit and loss account for 3months) 2011 Amortisation expenses A/c $21,302 To Patent A/c $21,302 (Being amortisation expenses charged to profit and loss account)

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