During 2010, Salem Company spent $1,360,000 in research and development costs. As a result of its R&D activities, Salem patented a new product on September 30, 2010. On September 30, 2010, Salem incurred and paid $42,000 of legal costs related to its new patent. The patent had a five-year legal life. Salem only prepares adjusting journal entries once each year as of 12-31 (year-end).Prepare the entries Salem made in 2010 related to the R&D activities and the patent.Prepare the entries Salem made in 2011 and 2012 related to the patent.On September 1, 2013, Salem spent $12,000 to defend its patent rights. Salem’s defense was successful, protecting the patent’s remaining legal life. Prepare the entries Salem made in 2013 related to the patent.

Question
Asked Dec 3, 2019
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  1. During 2010, Salem Company spent $1,360,000 in research and development costs. As a result of its R&D activities, Salem patented a new product on September 30, 2010. On September 30, 2010, Salem incurred and paid $42,000 of legal costs related to its new patent. The patent had a five-year legal life. Salem only prepares adjusting journal entries once each year as of 12-31 (year-end).
    1. Prepare the entries Salem made in 2010 related to the R&D activities and the patent.
    2. Prepare the entries Salem made in 2011 and 2012 related to the patent.
    3. On September 1, 2013, Salem spent $12,000 to defend its patent rights. Salem’s defense was successful, protecting the patent’s remaining legal life. Prepare the entries Salem made in 2013 related to the patent.

 

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Expert Answer

Step 1

 

(a)

 

Required journal entries:

Debit
Post
Credit
Date
Accounts and explanation
ref.
(S)
(S)
Research and Development expense
2010
1360000
Cash
1360000
(To record research and
development costs incurred)
Sep. 30,
Patent
42000
2010
Cash
42000
(To record legal costs related to
new patent)
Dec. 31, Amortization expense
(42000/5)*(3/12)
2100
2010
2100
Patent
(To record amortization of patent)
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Debit Post Credit Date Accounts and explanation ref. (S) (S) Research and Development expense 2010 1360000 Cash 1360000 (To record research and development costs incurred) Sep. 30, Patent 42000 2010 Cash 42000 (To record legal costs related to new patent) Dec. 31, Amortization expense (42000/5)*(3/12) 2100 2010 2100 Patent (To record amortization of patent)

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Step 2

 

(b)

 

Required jour...

Post
Debit
Credit
Date
Accounts and explanation
(S)
ref.
Dec. 31,
Amortization expense (42,000/5)
8400
2011
8400
Patent
To record amortization of patent)
Dec. 31,
Amortization expense
8400
2012
Patent
8400
(To record amortization of patent)
help_outline

Image Transcriptionclose

Post Debit Credit Date Accounts and explanation (S) ref. Dec. 31, Amortization expense (42,000/5) 8400 2011 8400 Patent To record amortization of patent) Dec. 31, Amortization expense 8400 2012 Patent 8400 (To record amortization of patent)

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