Question

Consider each of the transactions below. All of the expenditures were made in cash. The Edison Company spent $21,000 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 $6,500. In March, the Cleanway Laundromat bought equipment. Cleanway paid $15,000 down and signed a noninterest-bearing note requiring the payment of $22,500 in nine months. The cash price for this equipment was $34,000. On June 1, the Jamsen Corporation installed a sprinkler system throughout the building at a cost of $37,000. The Mayer Company, plaintiff, paid $21,000 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 $11,900 and a book value of $5,700 plus cash of $9,800 for a new one that had a fair value of $12,700. 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

SOLUTION

S.No.	Accounts title and Explanation	Debit ($)	Credit ($)
1.	Research and Development Expense	21,000
	Cash		21,000
2.	Legal fees expense	6,500
	Cash		6,500
3.	Equipment	34,000
	Discount on note payable	3,500
	Cash		15,000
	Notes Payable		22,500
4.	Building - sprinkler system	37,000
	Cash		37,000
5.	Patent	21,000
	Cash		21,000
6.	Machine - New	12,700
	Accumulated depreciation - Old machine	6,200
	Loss on Disposal	2,800
	Machine - Old		11,900
	Cash		9,800