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AccountingIntermediate Accounting: Reporting And Analysis3rd Edition

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Chapter 12, Problem 13E
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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

Solutions

Chapter
Section
Problem 1GI
Problem 2GI
Problem 3GI
Problem 4GI
Problem 5GI
Problem 6GI
Problem 7GI
Problem 8GI
Problem 9GI
Problem 10GI
Problem 11GI
Problem 12GI
Problem 13GI
Problem 14GI
Problem 15GI
Problem 16GI
Problem 17GI
Problem 18GI
Problem 19GI
Problem 20GI
Problem 1MC
Problem 2MC
Problem 3MC
Problem 4MC
Problem 5MC
Problem 6MC
Problem 7MC
Problem 8MC
Problem 9MC
Problem 10MC
Problem 1RE
Problem 2RE
Problem 3RE
Problem 4RE
Problem 5RE
Problem 6RE
Problem 7RE
Problem 8RE
Problem 9RE
Problem 10RE
Problem 1E
Problem 2E
Problem 3E
Problem 4E
Problem 5E
Problem 6E
Problem 7E
Problem 8E
Problem 9E
Problem 10E
Problem 11E
Problem 12E
Problem 13E
Problem 14E
Problem 15E
Problem 16E
Problem 17E
Problem 18E
Problem 19E
Problem 20E
Problem 1P
Problem 2P
Problem 3P
Problem 4P
Problem 5P
Problem 6P
Problem 7P
Problem 8P
Problem 9P
Problem 10P
Problem 11P
Problem 1C
Problem 2C
Problem 3C
Problem 4C
Problem 5C
Problem 6C
Problem 7C
Problem 8C
BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Davis Research Company engaged in the following 5 transactions during 2019:

  1. 1. Purchased a patent for $35,000. Legal costs of $5,000 were also incurred.
  2. 2. Costs paid to improve patent:

Chapter 12, Problem 13E, Davis Research Company engaged in the following 5 transactions during 2019: 1. Purchased a patent

  1. 3. Licensed a manufacturing process to another company and received $80,000 as an advance payment.
  2. 4. Successfully defended a patent infringement suit at a cost of $12,000.
  3. 5. Earned $5,000 of the advance payment on the licensed manufacturing process in Item 4.

Required:

Prepare journal entries to record the preceding transactions.

To determine

Prepare the preceding journal entries of Company D.

Explanation

Patent: Patent is a right that is exclusively granted by the Government to an individual or firm to process or design, to make, use or sell its invention for a limited period. It protects the right of the inventor from doing so by any other individual till the granted period expires.

Prepare the preceding journal entries of Company D as follows.

  1. 1.      Prepare journal entries for the purchase of patent:
DateAccounting Title and ExplanationPost Ref.Debit ($)Credit ($)
 Patent 40,000 
 Cash   40,000
 (To record the purchase of patent)   

Table (1)

  • A Patent is an asset account and it is increased. Therefore, debit patents account with $40,000
  • Cash is an asset account and it is decreased. Therefore, credit cash account with $40,000.
  1. 2.      Prepare journal entries for the costs paid to improvement:
DateAccounting Title and ExplanationPost Ref.Debit ($)Credit ($)
 Research and development expense 55,000 
 Cash   55,000
 (To record the research and development expenses)   

Table (2)

  • Research and development expense is an expense account. Expenses and losses reduce equity value. Therefore, debit research and development expense account with $55,000.
  • Cash is an asset account and it is decreased. Therefore, credit cash account with $55,000.
  1. 3.      Prepare journal entries for the cash received in advance:
DateAccounting Title and ExplanationPost Ref.Debit ($)Credit ($)
 Cash 80,000 
 Unearned service revenue  80,000
 (To record the cash received in advance)   

Table (3)

  • Cash is an asset account and it is increased...

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Ch-12 P-1GICh-12 P-2GICh-12 P-3GICh-12 P-4GICh-12 P-5GICh-12 P-6GICh-12 P-7GICh-12 P-8GICh-12 P-9GICh-12 P-10GI
Ch-12 P-11GICh-12 P-12GICh-12 P-13GICh-12 P-14GICh-12 P-15GICh-12 P-16GICh-12 P-17GICh-12 P-18GICh-12 P-19GICh-12 P-20GICh-12 P-1MCCh-12 P-2MCCh-12 P-3MCCh-12 P-4MCCh-12 P-5MCCh-12 P-6MCCh-12 P-7MCCh-12 P-8MCCh-12 P-9MCCh-12 P-10MCCh-12 P-1RECh-12 P-2RECh-12 P-3RECh-12 P-4RECh-12 P-5RECh-12 P-6RECh-12 P-7RECh-12 P-8RECh-12 P-9RECh-12 P-10RECh-12 P-1ECh-12 P-2ECh-12 P-3ECh-12 P-4ECh-12 P-5ECh-12 P-6ECh-12 P-7ECh-12 P-8ECh-12 P-9ECh-12 P-10ECh-12 P-11ECh-12 P-12ECh-12 P-13ECh-12 P-14ECh-12 P-15ECh-12 P-16ECh-12 P-17ECh-12 P-18ECh-12 P-19ECh-12 P-20ECh-12 P-1PCh-12 P-2PCh-12 P-3PCh-12 P-4PCh-12 P-5PCh-12 P-6PCh-12 P-7PCh-12 P-8PCh-12 P-9PCh-12 P-10PCh-12 P-11PCh-12 P-1CCh-12 P-2CCh-12 P-3CCh-12 P-4CCh-12 P-5CCh-12 P-6CCh-12 P-7CCh-12 P-8C

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