Brief Exercise 12-9 Ayayai, Inc., a private company that applies ASPE, incurred

Question

Brief Exercise 12-9 Ayayai, Inc., a private company that applies ASPE, incurred $14,000 in materials and $11,000 in direct labour costs between January and March 2017 to develop a new product. In May 2017, the criteria required to capitalize development costs were met. A further $44,000 was spent for materials, $13,500 for direct labour costs, $1,500 for borrowing costs, and $65,000 for directly related legal fees. Prepare the appropriate journal entries. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter O for the amounts.) Account Titles and Explanation Debit Credit (Ayayai chooses to expense all costs.) (Ayayai chooses to capitalize all costs.)

Explanation / Answer

Account Titles and Explanations Debit Credit

1) Material Expenses A/c Dr. $14,000

Labour Expenses A/c Dr. $ 11,000

To Cash A/c $ 25000

( Expenses Incurred )

2) Asset A/c Dr. $ 1,24,000

To Cash A/c $ 1,24,000

( Capitalization)

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