During the current year, Cartwright Corporation’s accountant recorded numerous transactions in an account entitled Intangible Assets, as follows: Jan. 2 Paid incorporation fees. $17,500 11 Paid legal fees for the organization of the company. 7,500 25 Paid for large-scale advertising campaign for the year. 15,000 Apr. 1 Acquired land for $15,000 and a building for $20,000 to house the R&D activities. The building has a 20-year life. 35,000 May 15 Purchased materials exclusively for use in R&D activities. Of these materials, 20% are left at the end of the year and will be used in the same project next year. (They have no alternative use.) 15,000 June 30 Paid expenses related to obtaining a patent. 10,000 Dec. 11 Purchased an experimental machine from an inventor. The machine is expected to be used for a particular R&D activity for 2 years, after which it will have no residual value. 12,000 31 Paid salaries of employees involved in R&D. 30,000 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.
During the current year, Cartwright Corporation’s accountant recorded numerous transactions in an account entitled Intangible Assets, as follows: Jan. 2 Paid incorporation fees. $17,500 11 Paid legal fees for the organization of the company. 7,500 25 Paid for large-scale advertising campaign for the year. 15,000 Apr. 1 Acquired land for $15,000 and a building for $20,000 to house the R&D activities. The building has a 20-year life. 35,000 May 15 Purchased materials exclusively for use in R&D activities. Of these materials, 20% are left at the end of the year and will be used in the same project next year. (They have no alternative use.) 15,000 June 30 Paid expenses related to obtaining a patent. 10,000 Dec. 11 Purchased an experimental machine from an inventor. The machine is expected to be used for a particular R&D activity for 2 years, after which it will have no residual value. 12,000 31 Paid salaries of employees involved in R&D. 30,000 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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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During the current year, Cartwright Corporation’s accountant recorded numerous transactions in an account entitled Intangible Assets, as follows:
| Jan. 2 | Paid incorporation fees. | $17,500 |
| 11 | Paid legal fees for the organization of the company. | 7,500 |
| 25 | Paid for large-scale advertising campaign for the year. | 15,000 |
| Apr. 1 | Acquired land for $15,000 and a building for $20,000 to house the R&D activities. The building has a 20-year life. | 35,000 |
| May 15 | Purchased materials exclusively for use in R&D activities. Of these materials, 20% are left at the end of the year and will be used in the same project next year. (They have no alternative use.) | 15,000 |
| June 30 | Paid expenses related to obtaining a patent. | 10,000 |
| Dec. 11 | Purchased an experimental machine from an inventor. The machine is expected to be used for a particular R&D activity for 2 years, after which it will have no residual value. | 12,000 |
| 31 | Paid salaries of employees involved in R&D. | 30,000 |
Required:
| Prepare |
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