Exercise 12-16 Crane Company from time to time embarks on a research program whe
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Question
Exercise 12-16
Crane Company from time to time embarks on a research program when a special project seems to offer possibilities. In 2016, the company expends $326,000 on a research project, but by the end of 2016 it is impossible to determine whether any benefit will be derived from it.
The project is completed in 2017, and a successful patent is obtained. The R&D costs to complete the project are $116,000. The administrative and legal expenses incurred in obtaining patent number 472-1001-84 in 2017 total $17,200. The patent has an expected useful life of 5 years. Record these costs in journal entry form. Also, record patent amortization (full year) in 2017. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
Account Titles and Explanation
Debit
Credit
(To record research and development costs)
(To record legal and administrative costs)
(To record one year’s amortization expense)
SHOW LIST OF ACCOUNTS
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In 2018, the company successfully defends the patent in extended litigation at a cost of $49,600, thereby extending the patent life to December 31, 2025. What is the proper way to account for this cost? Also, record patent amortization (full year) in 2018. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
Account Titles and Explanation
Debit
Credit
(To record legal cost of successfully defending patent)
(To record one year’s amortization)
Explanation / Answer
SOLUTION
(A)
(B)
S.No. Accounts title and Explanation Debit ($) Credit ($) 1. Research and Development expense 116,000 Accounts Payable 116,000 (To record research and development costs) 2. Patents 17,200 Accounts Payable 17,200 (To record legal and administrative costs) 3. Patent Amortization Expense ($17,200 / 5) 3,440 Patents 3,440 (To record one year’s amortization expense)Related Questions
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