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 experniditures were made in cosh. 1 The Edison Company spent $26,000 during the year for experimental purposes in connection with the development of a new product. 2 In Apri, the Marshall Company lost a patent infringement suit and pald the plainntiff $9,000. 3. In March, the Cleanway Laundromat bought equipment Cleanway paid $20,000 down and signed a noninterest bearing note requiring the payment of $25.000 in nine months. The cash price for this equipment was $39,000. 4. On June 1, the Jamsen Corporation instaled a sprinkler system throughout the building ata cost of $42.000 5. The Mayer Company, plaintiff, paid $26.000 in legat fees in November, in connection with a successful infringement suit on its patent. 6. The Johnson Company traded its old machine with an original cost of $14 400 and a book value of $7,200 plus cash of $10,800 for a new one that had a fair value of $14,200. The exchange has commercial substance. Required: Prepare jourmal entries to record each of the above transactions. (If no entry is required for a transaction/event, select "No journel entry required" in the first account field.) View transaction list Journal entry worksheet 3. 6. The Edison Company spent $26,000 during the year for experimental purposes in connection with the development of a new product. Note: Eeter debts befare eredits Transaction General Journal Debit Credit Record eniry Clear entry View gonersl journal

Answer 1

Answer
S.No.	Account titles and Explanation	Debit ($)	Credit ($)
1	Research and development expense	$   26,000
	Cash		$       26,000
	( To record R& D Exp)
2	Legal fees expense	$     9,000
	Cash		$         9,000
	(To record Legal fees expense)
3	Equipment	$   39,000
	Discount on note payable	$     6,000
	Cash		$       20,000
	Note payable		$       25,000
	( To record purchase of equipment)
4	Building - Sprinkler system	$   42,000
	Cash		$       42,000
	( To record the installation Sprinkler system)
5	Patent	$   26,000
	Cash		$       26,000
	( To record the legal fees )
6	Machine - New	$   14,200
	Loss on trade-in	$     3,800
	Accumulated depreciation - Machine ($14400-$7200)	$     7,200
	Machine - Old		$       14,400
	Cash		$       10,800
	( To record the exchange of new machine in exchange of old machine )

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