Question

Consider each of the transactions below. All of the expenditures were made in cash. The Edison Company spent $19,000 during the year for experimental purposes in connection with the development of a new product. In April, the Marshall Company lost a patent infringement suit and paid the plaintiff $5,500. 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 equipment was $32,000. On June 1, the Jamsen Corporation installed a sprinkler system throughout the building at a cost of $35,000. The Mayer Company, plaintiff, paid $19,000 in legal fees in November, in connection with a successful infringement suit on its patent. The Johnson Company traded its old machine with an original cost of $10,900 and a book value of $5,100 plus cash of $9,400 for a new one that had a fair value of $12,100. The exchange has commercial substance. Prepare journal entries to record each of the above transactions. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) The Edison Company spent $19,000 during the year for experimental purposes in connection with the development of a new product.

Answer 1

Transaction General Journal Debit Credit 1 Research and development expense 19000 19000 Cash 5500 2 Legal fees expense Cash 5500 3 Equipment 32000 Discount on note payable 2500 13000 Cash Note payable 21500 4 Building - sprinkler system 35000 35000 Cash 5 Patent 19000 Cash 19000 6 Machine - new 12100 Loss on trade-in 14500 Accumulated depreciation- machine-10900-5100 5800 Machine- old 10900 9400 Cash