he journal entries to eliminate the Intangible Assets account and correctly record all items, including amortization and depreciation would include:
During the 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 and no residual value. |
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 |
Question
Assuming that Cartwright amortizes patents over 12 years and uses Straight-Line
|
Credit to R&D Expense of $17,500 |
||
|
Debit to |
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|
Credit to COGS of $15,000 |
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|
Debit to Amortization Expense - Patent of $833 |
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