Problem 10-5 Acquisition costs; journal entries [LO10-1, 10-3, 10-6, 10-8] Consi

Question

Problem 10-5 Acquisition costs; journal entries [LO10-1, 10-3, 10-6, 10-8] Consider each of the transactions below. All of the expenditures were made in cash. 1. The Edison Company spent $19,000 during the year for experimental purposes in connection with the development of a new product. 2. In April, the Marshall Company lost a patent infringement suit and paid the plaintiff $5,500 3. In March, the Cleanway Laundromat bought equipment. Cleanway paid $13,000 down and signed a noninterest-bearing note requiring the payment of $21,500 in nine months. The cash price for this 4. On June 1, the Jamsen Corporation installed a sprinkler system throughout the building at a cost of 5. The Mayer Company, plaintiff, paid $19,000 in legal fees in November, in connection with a successful 6. The Johnson Company traded its old machine with an original cost of $10,900 and a book value of equipment was $32,000 $35,000 infringement suit on its patent. $5,100 plus cash of $9,400 for a new one that had a fair value of $12,100. The exchange has commercial substance Required Prepare journal entries to record each of the above transactions. (lf no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet The Edison Company spent $19,000 during the year for experimental purposes in connection with the development of a new product

Explanation / Answer

SOLUTION

S.No. Account titles and Explanation Debit ($) Credit ($) 1. Research and development expense 19,000 Cash 19,000 2. Legal fees expense 5,500 Cash 5,500 3. Equipment 32,000 Discount on note payable 2,500 Cash 13,000 Note payable 21,500 4. Building - Sprinkler system 35,000 Cash 35,000 5. Patent 19,000 Cash 19,000 6. Machine - New 12,100 Loss on trade-in 2,400 Accumulated depreciation - Machine ($10,900-$5,100) 5,800 Machine - Old 10,900 Cash 9,400

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