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Intermediate Accounting: Reporting...

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

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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During the current year, Cartwright Corporation’s accountant recorded numerous transactions in an account entitled Intangible Assets, as follows:

Chapter 12, Problem 2P, During the current year, Cartwright Corporations accountant recorded numerous transactions in an

Required:

Prepare adjusting journal entries to eliminate the Intangible Assets account and correctly record all the items, including appropriate amortization adjustments. Cartwright amortizes patents over 10 years.

To determine

Prepare necessary adjusting journal entries of Company C.

Explanation

Intangible assets: These are the long-term assets which are not physical in nature, but possess value. The intangible assets would be amortized over their definite useful life or limited useful life, and those with indefinite or unlimited lives are not amortized.

Prepare necessary adjusting journal entries of Company C as follows:

DateAccount Title & ExplanationDebit ($)Credit($)
December 31Start-up costs17,500 
 Intangible assets 17,500
 (To record the incorporation fees (start-up costs) paid during the year)  
December 31Start-up costs7,500 
 Intangible assets 7,500
 (To record the legal fees (start-up costs) paid during the year)  
December 31Advertising expense15,000 
 Intangible assets   15,000
 (To record the advertising expense incurred)  
December 31Land15,000 
 Building20,000 
 Intangible assets   35,000
 (To record the land and building acquired for the research and development activities)  
December 31Research and development expense15,000 
 Intangible assets   15,000
 (To record the materials purchased for  research and development activities)  
December 31Patent10,000 
 Intangible assets   10,000
 (To record the patent expense paid during the year)  
December 31Research and development expense12,000 
 Intangible assets   12,000
 (To record the machine purchased for research and development activities)  
December 31Research and development expense30,000 
 Intangible assets   30,000
 (To record the salaries paid for the research and development activities)  
December 31Research and develo...

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