Chapter 10, Problem 10.11P

Research and development

• LO10–8

In 2018, Starsearch Corporation began work on three research and development projects. One of the projects was completed and commercial production of the developed product began in December. The company’s fiscal year-end is December 31. All of the following 2016 expenditures were included in the R&D expense account:

Salaries and wages for:
Lab research	$ 300,000
Design and construction of preproduction prototype	160,000
Quality control during commercial production	20,000
Materials and supplies consumed for:
Lab research	60,000
Construction of preproduction prototype	30,000
Purchase of equipment	600,000
Patent filing and legal fees for completed project	40,000
Payments to others for research	120,000
Total	$1,330,000

$200,000 of equipment was purchased solely for use in one of the projects. After the project is completed, the equipment will be abandoned. The remaining $400,000 in equipment will be used on future R&D projects. The useful life of equipment is five years. Assume that all of the equipment was acquired at the beginning of the year.

Required:

Prepare journal entries, reclassifying amounts in R&D expense, to reflect the appropriate treatment of the expenditures.