Question

In 2018, 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 $ 2,050,000 690,000 310,000 61,000 210,000 41,000 21,000 $3,383,000 The equipment will be used on this and other research projects. Depreciation on the equipment for 2018 is $11,000. 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 to expense R&D costs incorrectly capitalized. Note: Enter debits before credits. Event General Journal Debit Credit

Answer 1

	Space Technology Company
1	Correcting entry for R&D Expense
	Accounts	Debit	Credit
	R & D Expense	2,050,000
	R & D Expense	690,000
	R & D Expense	310,000
	R & D Expense	210,000
	Intangible Assets(Patent)		3,260,000
2	Capitalization of Equipment -Correcting entry
	Fixed Asset -Equipment	61,000
	Intangible Assets(Patent)		61,000
3	Equipment depreciation recording
	Depreciation Expense	11,000
	Accumulated depreciation-Equipment		11,000