Acquisition costs;
• LO10–1, LO10–3, LO10–6, LO10–8
Consider each of the transactions below. All of the expenditures were made in cash.
1. The Edison Company spent $12,000 during the year for experimental purposes in connection with the development of a new product.
2. In April, the Marshall Company lost a patent infringement suit and paid the plaintiff $7,500.
3. In March, the Cleanway Laundromat bought equipment. Cleanway paid $6,000 down and signed a noninterest-bearing note requiring the payment of $18,000 in nine months. The cash price for this equipment was $23,000.
4. On June 1, the Jamsen Corporation installed a sprinkler system throughout the building at a cost of $28,000.
5. The Mayer Company, plaintiff, paid $12,000 in legal fees in November, in connection with a successful infringement suit on its patent.
6. The Johnson Company traded its old machine with an original cost of $7,400 and a book value of $3,000 plus cash of $8,000 for a new one that had a fair value of $10,000. The exchange has commercial substance.
Required:
Prepare journal entries to record each of the above transactions.
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Intermediate Accounting, 10 Ed
- Use the following to answer questions 31 – 32 Last year T, Inc., had the following expenditures related to developing its trademark: General advertising costs $224,000 Advertising specifically focused on trademark Legal fees to register trademark 45,600 550 Legal fees for successful defense of new trademark 75,000 Total $345,150 During your year-end review of the accounts related to intangibles, you discover that the company has capitalized all the above as costs of the trademark. Management contends that all the costs increase the value of the trademark and, therefore, should be capitalized. 31. Which of the above costs should NOT be capitalized? 32. $ What is the total cost that should be capitalized to the trademark account? Chapter 7 Page 7-1arrow_forwardRequired information Problem 10-6A (Algo) Disposal of plant assets LO C1, P1, P2 [The following information applies to the questions displayed below.] Onslow Company purchased a used machine for $192,000 cash on January 2. On January 3, Onslow paid $8,000 to wire electricity to the machine. Onslow paid an additional $1,600 on January 4 to secure the machine for operation. The machine will be used for six years and have a $23,040 salvage value. Straight-line depreciation is used. On December 31, at the end of its fifth year in operations, it is disposed of. Problem 10-6A (Algo) Part 2 2. Prepare journal entries to record depreciation of the machine at December 31. View transaction list Journal entry worksheetarrow_forwardE10-3 Acquisition Costs Voiture Company manufactures compact, energy-efficient cars. On April 1, it purchased a machine for its assembly line at a contract price of $400,000 with terms of 2/10, n/30. Voiture paid the contract price on April 8 and also incurred installation and transportation costs of $5,000, sales tax of $32,000, and testing costs of $2,000. During testing, the machine was accidentally damaged, so the company had to pay $1,000 to repair it. Required: Determine the cost of the machine. For each item excluded from property, plant and equipment, how would the item be classified in the financial statements?arrow_forward
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