Question

Consider each of the transactions below. All of the expenditures were made in cash.

The Edison Company spent $25,000 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 $8,500.

In March, the Cleanway Laundromat bought equipment. Cleanway paid $19,000 down and signed a noninterest-bearing note requiring the payment of $24,500 in nine months. The cash price for this equipment was $38,000.

On June 1, the Jamsen Corporation installed a sprinkler system throughout the building at a cost of $41,000.

The Mayer Company, plaintiff, paid $25,000 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 $13,900 and a book value of $6,900 plus cash of $10,600 for a new one that had a fair value of $13,900. The exchange has commercial substance.

Answer 1

No.	Account Titles	Debit	Credit
1	Research and development expenses	$25,000
	Cash		$25,000
2	Legal fees expenses	$8,500
	Cash		$8,500
3	Equipment	$38,000
	Discount on Note Payable	$5,500
	Cash		$19,000
	Note Payable		$24,500
4	Building - sprinkler system	$41,000
	Cash		$41,000
5	Patent	$25,000
	Cash		$25,000
6	Machine - new	$13,900
	Accumulated Depreciation - machine (13900 - 6900)	$7,000
	Loss on trade in	$3,600
	Cash		$10,600
	Machine - old		$13,900