Margaret Avery Company from time to time embarks on a research program when a special project seems to offer possibilities. In 2010, the company expends $325,000 on a research, but by the end of 2010, it is impossible to determine whether any benefit will be derived from it. in A) What account should be charged for the $325,000, and how should it be shown the financial statement? B) The project is completed in 2011, and a successful patent is obtained. The R&D costs to complete the project are $130,000 ($36,000 of these costs were incurred after achieving economic viability,i.e., satisfied all six criteria for capitalization of development costs in the Patent account). The administrative and legal expenses incurred in obtaining patent number 472-1001-84 in 2011 total $24,000. The patent has an expected useful life of 5 years. Record these costs in journal entry form in 2011. C) Record patent amortization (full year) on December 31, 2011. D) In 2012, the company successfully defended the patent in extended litigation at a cost of $47,200, thereby extending the patent life to December 31, 2019. What is the proper way to account for this cost? Give the journal entry to capitalize this E) Record patent amortization (full year) in 2012. cost.
Margaret Avery Company from time to time embarks on a research program when a special project seems to offer possibilities. In 2010, the company expends $325,000 on a research, but by the end of 2010, it is impossible to determine whether any benefit will be derived from it. in A) What account should be charged for the $325,000, and how should it be shown the financial statement? B) The project is completed in 2011, and a successful patent is obtained. The R&D costs to complete the project are $130,000 ($36,000 of these costs were incurred after achieving economic viability,i.e., satisfied all six criteria for capitalization of development costs in the Patent account). The administrative and legal expenses incurred in obtaining patent number 472-1001-84 in 2011 total $24,000. The patent has an expected useful life of 5 years. Record these costs in journal entry form in 2011. C) Record patent amortization (full year) on December 31, 2011. D) In 2012, the company successfully defended the patent in extended litigation at a cost of $47,200, thereby extending the patent life to December 31, 2019. What is the proper way to account for this cost? Give the journal entry to capitalize this E) Record patent amortization (full year) in 2012. cost.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Margaret Avery Company from time to time embarks on a research program
when a special project seems to offer possibilities. In 2010, the company
expends $325,000 on a research, but by the end of 2010, it is impossible to
determine whether any benefit will be derived from it.
in
A) What account should be charged for the $325,000, and how should it be
shown
the
financial
statement?
B) The project is completed in 2011, and a successful patent is obtained. The
R&D costs to complete the project are $130,000 ($36,000 of these costs were
incurred after achieving economic viability,i.e., satisfied all six criteria for
capitalization of development costs in the Patent account). The administrative
and legal expenses incurred in obtaining patent number 472-1001-84 in 2011
total $24,000. The patent has an expected useful life of 5 years. Record these
costs
in
journal
entry
form
in
2011.
C) Record patent amortization (full year) on December 31, 2011.
D) In 2012, the company successfully defended the patent in extended
litigation at a cost of $47,200, thereby extending the patent life to December
31, 2019. What is the proper way to account for this cost? Give the journal
entry
to
capitalize
this
E) Record patent amortization (full year) in 2012.
cost.
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