8. Problem 10-11 Research and development [LO10-8] In 2013, Starsearch Corporati
ID: 2356343 • Letter: 8
Question
8.
Problem 10-11 Research and development [LO10-8]
In 2013, 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 2013 expenditures were included in the R&D expense account:
$235,000 of equipment was purchased solely for use in one of the projects. After the project is completed, the equipment will be abandoned. The remaining $435,000 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.
Prepare journal entries, reclassifying amounts in R&D expense, to reflect the appropriate treatment of the expenditures. (If no entry is required for particular aevent, select "No journal entry required" in the first account field.)
In 2013, 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 2013 expenditures were included in the R&D expense account:
Explanation / Answer
Dep using SLN (Cost-Salvage)/Life = (435,000-0)/5 = $87,000 pa 1 To capitalize the cost of equipment to be used on future projects incorrectly charged to R&D expense. Dr. Equipment 435,000 Cr. R&D Expense 435,000 2 To record depreciation on equipment used in R&D projects. Dr. R&D Expense 87,000 Cr. A/D - Equipment 87,000 3 To capitalize filing and legal fees for patent incorrectly charged to R&D expense. Dr. Patent 47,000 Cr. R&D Expense 47,000 4 To reclassify the expenditures made for quality control during commercial production. Dr. Inventory 27,000 Cr. R&D Expense 27,000
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