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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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KLK Clothing Company manufactures professional clothing for women. In order to keep costs low while still producing quality clothes, KLK conducts many R&D projects. On a current project, KLK researchers used $35,000 of cotton and $27,000 of wool from its inventory. KLK paid its researchers $30,000 cash in wages and purchased a special weaving machine for $60,000 cash. The machine was not suitable for use in production activities and was not expected to be used in other research projects. In addition, depreciation expense related to the project’s research lab amounted to $20,000.

Required:

Prepare the journal entry to record KLKֺ’s R&D costs.

To determine

Prepare journal entries to record the given transaction.

Explanation

Research and development costs: It refers to the expenditures spent on research, development, improvement or introduction of new products, processes, a new patent or even a copyright, that a company expects to get benefits. It is reported under the intangible asset in the balance sheet.

Prepare journal entries to record the research and development costs of Company K:

DateAccounting Title and ExplanationPost Ref.Debit ($)Credit ($)
 Research and development Expense (1) 172,000 
 Cash   90,000
 Inventory  62,000
 Accumulated Depreciation  20,000
 (To record research and development expense)   

Table (1)

  • Research and development expense is an expense account...

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