Question

Exercise 10-26 (Algo) Research and development (LO10-8] In 2021. Space Technology Company modified its model Z2 satellite to incorporate a new communication device. The company made the following expenditures: Basic research to develop the technology Engineering design work Development of a prototype device Acquisition of equipment Testing and modification of the prototype Legal and other fees for patent application on the new communication system Legal fees for successful defense of the new patent Total $2,200,000 720,000 340,000 64,000 240,000 44,000 24,000 $3,632,000 The equipment will be used on this and other research projects. Depreciation on the equipment for 2021 is $14.000. During your year-end review of the accounts related to intangibles, you discover that the company has capitalized all of the above as costs of the patent Management contends that the device simply represents an improvement of the existing communication system of the satellite and, therefore, should be capitalized. Required: Prepare correcting entries that reflect the appropriate treatment of the expenditures. (If no entry is required for a transaction/event, select "No journal entry required" In the first account field.) View transaction list Journal entry worksheet < 1 2 3 Record the correcting entry for the patent. Note: Enter debits before credits Transaction General Journal Debit Credit

Answer 1

- JM 2021 space Technology company Rog Prepare conecting Entries: Date Account Name pebit credit Resegach e Development Expense $ 3.500,000 TO Patent $ 3,500,000 64000 Equipment - TO Patent $ 64000 Research & Development Expense $ 14000 TO Accumulated Depexecration $ 14000 Equipment Explanation 1) Research & Development Expense: BASIC "Research to develop technology engineering Design work bevelopment of prototype testity & modification of prototype TOTO $2,200 000 7,20,000 3,40,000 240,000 $ 3500,000

Answer 2