During 2010, George Winston Corporation spent $164,350 in research and developme

Question

During 2010, George Winston Corporation spent $164,350 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 $26,880 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.

In 2014, Winston determined that a competitor’s product would make the New Age Piano obsolete and the patent worthless by December 31, 2015. Prepare all journal entries required in 2014 and 2015.

Explanation / Answer

Date

Date

Account Title & Explanation Debit Credit 2010 Intangible Asset (R & D Expense) $164,350 Cash/Bank/Account Payables $164,350 Being patent R & D expenses capitalised 2010 Intangible Asset (Legal Expenses) $26,880 Cash/Bank/Account Payables $26,880 Being patent Legal expenses capitalised 2010 Amortization A/c $9,562 Intangible Asset $9,562 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 ($191230 / 10 year = $19123 per year) Amortisation exp. debited to Profit & loss account 2011 Amortization A/c $19,123 Intangible Asset $19,123 Amortisation exp. debited to Profit & loss account

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