Question

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, eee $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

Answer 1

Date	Particulars	Debit ($)	Credit ($)
1	Research and Development Expense	3,500,000
	Patent		3,500,000
	(To record the research and development exp)
2	Equipment	64,000
	Patent		64,000
	(To record the Equipment)
3	Research and Development Expense	14,000
	Accumulated Depreciation-Equipment		14,000
	(To record the depreciation on research and development)
	Working:
	Basic research to develop the technology	2,200,000
	Engineering design work	720,000
	Development of a prototype device	340,000
	Trust and modification of the prototype	240,000
	Total Research and Development Cost	3,500,000