During the year end audit of Cressman Corporation's financial statement for 2019, you discover thefollowing items:1. Cressman capitalized $75,000 to the patent account at the beginning of 2018 for the cost of apatent. This amount included $50,000 of R&D costs. The patent was amortized over a 20-yearlife in 2018 and 2019.2. At the beginning of 2018, Cressman paid its lawyers $8,000 to successfully defend a patentinfringement suit regarding the patent in item 1. Cressman debited this cost to legal feesexpense.3. At the beginning of 2018, Cressman purchased a patent for $30,000 from the Baylor Company toprevent potential competition. It recorded the cost in the Patent account and amortized thiscost over the remaining legal life of the patent obtained in item 1 (19 years). However,Cresssman agreed to a suggestion by the auditors that the life of the original patent obtained inItem 1 was protected for only 7 more years as of the beginning of 2020.Required.Prepare adjusting and correcting journal entries on December 31, 2019. 2018 is a closed year and anyadjustments for that period need to be made in 2019.

The journal entries are the first entries which are recorded in the books of accounts on Journal…

Answered: During the year end audit of Cressman…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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How much of the transactions below should be charged against CELESTINE's Net Income for the year ended 2020?
Please help me
What is the correct journal entry?
On January 01, 2021 Commission on Audit purchased an item of equipment for P550,000. The purchase price was funded by raising a loan of P 605,000 (including 5,000 loan raising fees). The loan is secured against the equipment. In January 2021, COA incurred costs of P 20,000 in transporting the equipment to the entity’s site and P 100,000 in installing the equipment at the site. At the end of the equipment’s 5-year useful life the entity is required to dismantle the equipment and restore the land upon which the factory is built. The present value of the cost of dismantling the equipment and restoring the environment is estimated to be P100,000. COA’s engineer incurred material cost, P55,000 and labor cost, P65,000 in modifying the equipment so that it can produce the government forms needed by Management. The equipment was ready for use on March 01, 2021. However, because of low initial production levels the entity incurred a loss of P23,000 on operating the equipment during March.…

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