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

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.)

Explanation / Answer

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

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