Question

Consider each of the transactions below. All of the expenditures were made in cash. The Edison Company spent $15,000 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 $9,000. In March, the Cleanway Laundromat bought equipment. Cleanway paid $9,000 down and signed a noninterest-bearing note requiring the payment of $19,500 in nine months. The cash price for this equipment was $26,000. On June 1, the Jamsen Corporation installed a sprinkler system throughout the building at a cost of $31,000. The Mayer Company, plaintiff, paid $15,000 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 $8,900 and a book value of $3,900 plus cash of $8,600 for a new one that had a fair value of $10,900. 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

Answer

Journal entries:

Date	Particulars	Dr	Cr
	Research and development expense	$15000
	Cash		$15000
	Legal fees expense	$9000
	Cash		$9000
	Equipment	$26000
	Discount on notes payable	$2500
	Cash		$9000
	Notes payable		$19500
	Building - SPrinker system	$31000
	Cash		$31000
	Patents	$15000
	Cash		$15000
	Machinery - (New)	$10900
	Loss on sale of machine - (old)	$1600
	Accumulated depreciation - (old)($8900-$3900)	$5000
	Machinery - (old)		$8900
	Cash		$8600