a. Explanation Goodwill : The value of an intangible asset is determined by the factors like quality, management, capacity to generate income and reputation with the general public and other competitive firms is known as the goodwill for the firm Amortization: When the costs of intangibles are allocated over a certain period in a systematic manner it is known as amortization of intangible assets. Research and Development Expenditure: Expenditures incurred for the purpose of research or generation of new technology, products or service is known as research and development expenditure 1. Journal entry to record the constructing cost of new laboratory. Date Account title and explanation Post. Ref. Debit ($) Credit ($) January 1 Laboratory 14,000,000 Cash 14,000,000 (to record the amount paid for the laboratory) Table (1) Laboratory is the assets for the company. Since, laboratory has been acquired due to which asset of company will increase. Hence, laboratory account is debited. Cash is the asset account. Since, cash has been paid due to which equity of the reduced. Hence, cash account is credited. 2. Journal entry to record the acquisition of R&D equipment. Date Account title and explanation Post. Ref. Debit ($) Credit ($) January 1 R&D Equipment 568,000 Cash 568,000 (to record the amount paid for the acquisition of R&D) Table (2) R&D equipment is the assets for the company. Since, R&D equipment has been acquired due to which asset of company will increase. Hence, R&D equipment account is debited. Cash is the asset account. Since, cash has been paid due to which equity of the reduced. Hence, cash account is credited. 3. Journal entry to record the acquisition of material and supplies. Date Account title and explanation Post. Ref. Debit ($) Credit ($) January 1 Testing material and supplies ( $ 125 , 000 × 30 % ) 37,500 R&D Equipment ( $ 125 , 000 × 70 % ) 87,500 Cash 125,000 (to record the amount paid for the acquisition of R&D) Table (3) Testing material and supplies are the expense for the company. Since, it reduces the profit of the company. Hence, Testing material and supplies account is debited R&D equipment is the assets for the company. Since, R&D equipment has been acquired due to which asset of company will increase. Hence, R&D equipment account is debited. Cash is the asset account. Since, cash has been paid due to which equity of the reduced. Hence, cash account is credited. 4. Journal entry to the payment of R&D expense. Date Account title and explanation Post. Ref. Debit ($) Credit ($) January 1 R&D expense 265,700 Cash 265,700 (To record the payment of the R&D expense) Table (4) R&D expense is the expense for the company. Since, it reduces the profit of the company. Hence, R&D expense account is debited. Cash is the asset account. Since, cash has been paid due to which equity of the reduced. Hence, cash account is credited. 5. Journal entry to the payment of R&D expense. Date Account title and explanation Post. Ref. Debit ($) Credit ($) January 1 R&D expense 168,500 Cash 168,500 (to record the payment of the R&D expense) Table (5) R&D expense is the expense for the company b. To determine The effect of the each of the transaction

3rd Edition

ISBN: 9780136946694

Author: GORDON

Publisher: RENT PEARS

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Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 11, Problem 11.8P

To determine

To prepare: The journal entry of the each transaction.

To determine

The effect of the each of the transaction

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Chapter 11, Problem 11.7P

Chapter 11, Problem 11.9P

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