Question

In 2018, 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 2018 expenditures were included in the R&D expense account: Salaries and wages for: Lab research Design and construction of preproduction prototype Quality control during commercial production 490,000 350,000 39,000 Materials and supplies consumed for: 79,000 49,000 790,000 59,000 215,000 $2,071,000 Lab research Construction of preproduction prototype Purchase of equipment Patent filing and legal fees for completed project Payments to others for research Total $295,000 of equipment was purchased solely for use in one of the projects. After the project is completed, the equipment will be abandoned. The remaining $495,000 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:

Event	Description	Debit $	Credit $
1	Equipment	495000
	Research and development expense		495000
2	Research and development expense	99000
	Accumulated depreciation—equipment		99000
	(495000/5)
3	Patent	59000
	Research and development expense		59000
4	Inventory	39000
	Research and development expense		39000
	Quality control costs would either be treated as manufacturing overhead and included in the cost of inventory (as in this journal entry), or expensed in the period incurred.