Academic Integrity: tutoring, explanations, and feedback — we don’t complete graded work or submit on a student’s behalf.

In 2016, Space Technology Company modified its model Z2 satellite to incorporate

ID: 2467933 • Letter: I

Question

In 2016, Space Technology Company modified its model Z2 satellite to incorporate a new communication device. The company made the following: expenditures: The equipment will be used on this and other research projects. Depreciation on the equipment for 2016 is $10,000. During your year-end review of the accounts related to intangibles, you discover that the company has capitalized all of the above as costs of the patent. Management contends that the device simply represents an improvement of the existing communication system of the satellite and, therefore, should be capitalized. Required: Prepare correcting entries that reflect the appropriate treatment of the expenditures. Prepare correcting entries that reflect the appropriate treatment of the expenditures.

Explanation / Answer

Journal entries

Research & Development

$3,180,000

To Patent

$3,180,000

Equipment

$60,000

To Patent

$60,000

Research and development

$10,000

To Accumulated depreciation - equipment

$10,000

Basic research to develop technology

$2,000,000

Engineering designing work

  680,000

Development of prototype device

   300,000

Testing and modification

200,000

total

$3,180,000

Research & Development

$3,180,000

To Patent

$3,180,000

Equipment

$60,000

To Patent

$60,000

Research and development

$10,000

To Accumulated depreciation - equipment

$10,000

Hire Me For All Your Tutoring Needs
Integrity-first tutoring: clear explanations, guidance, and feedback.
Drop an Email at
drjack9650@gmail.com
Chat Now And Get Quote