Question

In 2021, 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 2021 expenditures were included in the R&D expense account:

Salaries and wages for:
Lab research	$	480,000
Design and construction of preproduction prototype		340,000
Quality control during commercial production		38,000
Materials and supplies consumed for:
Lab research		78,000
Construction of preproduction prototype		48,000
Purchase of equipment		780,000
Patent filing and legal fees for completed project		58,000
Payments to others for research		210,000
Total	$	2,032,000

$290,000 of equipment was purchased solely for use in one of the projects. After the project is completed, the equipment will be abandoned. The remaining $490,000 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. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
  

Answer 1

Answer
General Journal	Debit	Credit
			Equipment	$490,000
R&D Expenses		$490,000
(To record cost of equipment )
R&D Expenses 490000/5	$ 98,000
Acc Dep - Equipment		$ 98,000
(To record depreciation
Patent (290000/5)	$ 58,000
R&D Expenses		$ 58,000
(TO record the capitalisation of legal fees)
Inventory	$ 38,000
R&D Expenses		$ 38,000
(To Reclassify the quality control Expense)
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