Question

Consider each of the transactions below. All of the expenditures were made in cash. The Edison Company spent $17,000 during the year for experimental purposes in connection with the development of a new product. In April, the Marshall Company lost a patent infringement suit and paid the plaintiff $10,000. In March, the Cleanway Laundromat bought equipment. Cleanway paid $11,000 down and signed a noninterest-bearing note requiring the payment of $20,500 in nine months. The cash price for this equipment was $28,000. On June 1, the Jamsen Corporation installed a sprinkler system throughout the building at a cost of $33,000. The Mayer Company, plaintiff, paid $17,000 in legal fees in November, in connection with a successful infringement suit on its patent. The Johnson Company traded its old machine with an original cost of $9,900 and a book value of $4,500 plus cash of $9,000 for a new one that had a fair value of $11,500. The exchange has commercial substance. Required: Prepare journal entries to record each of the above transactions. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

Cash transactions Journal Enteries Event Particulars Debit in $ Credit in $ 1 Research and development expense a/c Dr 17000 To Cash 17000 2 Legal fees expense a/c Dr 10000 To Cash 10000 3 Equipment a/c Dr. Dr. 28000 Discount on note payable a/c 3500 To Cash To Note payable 11000 4 Building -sprinkler system a/c To Cash Dr. 33000 33000 5 Patent a/c Dr. 17000 To Cash 17000 6 Machine-new a/c Loss on trade-in a/c Dr. Dr. Accumulated depreciation -machine a/c Dr 11400 2100 5400 To Machine- old To Cash 9900 9000