Question

During 2016, Flounder Corporation spent $151,200 in research and development costs. As a result, a new product called the New Age Piano was patented. The patent was obtained on October 1, 2016, and had a legal life of 20 years and a useful life of 10 years. Legal costs of $19,200 related to the patent were incurred as of October 1, 2016.

Prepare all journal entries required in 2016 and 2017 as a result of the transactions above. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Date	Account Titles and Explanation	Debit	Credit
2016	enter an account title to record research and development expenses	enter a debit amount	enter a credit amount
	enter an account title to record research and development expenses	enter a debit amount	enter a credit amount
	(To record research and development expenses)
2016	enter an account title to record legal expenses	enter a debit amount	enter a credit amount
	enter an account title to record legal expenses	enter a debit amount	enter a credit amount
	(To record legal expenses)
2016	enter an account title to record amortization expense	enter a debit amount	enter a credit amount
	enter an account title to record amortization expense	enter a debit amount	enter a credit amount
	(To record amortization expense)
2017	enter an account title	enter a debit amount	enter a credit amount
	enter an account title	enter a debit amount	enter a credit amount

eTextbook and Media

Solution

List of Accounts

  

Attempts: unlimited

(b)

On June 1, 2018, Flounder spent $9,920 to successfully prosecute a patent infringement suit. As a result, the estimate of useful life was extended to 12 years from June 1, 2018. Prepare all journal entries required in 2018 and 2019. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Date	Account Titles and Explanation	Debit	Credit
2018	enter an account title to record patents	enter a debit amount	enter a credit amount
	enter an account title to record patents	enter a debit amount	enter a credit amount
	(To record patents)
2018	enter an account title to record amortization expense	enter a debit amount	enter a credit amount
	enter an account title to record amortization expense	enter a debit amount	enter a credit amount
	(To record amortization expense)
2019	enter an account title	enter a debit amount	enter a credit amount
	enter an account title	enter a debit amount	enter a credit amount

Answer 1

Solution:

a.

Date	Accounts titles and explanation	Debit($)	Credit($)
2016	Research and development expense a/c DR	151,200
	To cash a/c		151,200
	(Being Record the research and development expenses )
2016	Patents a/c Dr	19,200
	To cash a/c		19,200
	(Being record of legal expenses)
2016	Patent amortization expense a/c Dr	480
	To patents a/c		480
	(Being record of amortization expense) (19200 /10) x (3/12)
2017	Patent amortization expense a/c Dr	1,920
	To patents a/c		1,920
	(Being record of amortization expense) 19200/10

b.

Date	Accounts titles and explanation	Debit($)	Credit($)
2018	Patents a/c Dr	9,920
	To cash a/c		9,920
	(Being record of patents)
2018	Patent amortization expense a/c Dr	2,060*
	To patents a/c		2060*
	(Being record of amortization expenses)
2019	Patent amortization expense a/c Dr	2,160**
	To patents a/c		2,160**
	(Being record of amortization expense)

Explanation:

*2018 patent amortization expense =

(19200-480-1920) = 16800

and patent amortization expense in 2018 also

=(1920 x 5/12) + [(16800-800) / 12] x 7/12 + (9920/12) x (7/12)

=800+778+482

=2060

** Patent amortization expenses in 2019

= (16800-800) + 9920/12

= 2,160