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 $21,000 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 $6,500. In March, the Cleanway Laundromat bought equipment. Cleanway paid $15,000 down and signed a noninterest-bearing note requiring the payment of $22,500 in nine months. The cash price for this equipment was $34,000. On June 1, the Jamsen Corporation installed a sprinkler system throughout the building at a cost of $37,000. The Mayer Company, plaintiff, paid $21,000 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 $11,900 and a book value of $5,700 plus cash of $9,800 for a new one that had a fair value of $12,700. 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

SOLUTION

S.No. Accounts title and Explanation Debit ($) Credit ($) 1. Research and Development Expense 21,000 Cash 21,000 2. Legal fees expense 6,500 Cash 6,500 3. Equipment 34,000 Discount on note payable 3,500 Cash 15,000 Notes Payable 22,500 4. Building - sprinkler system 37,000 Cash 37,000 5. Patent 21,000 Cash 21,000 6. Machine - New 12,700 Accumulated depreciation - Old machine 6,200 Loss on Disposal 2,800 Machine - Old 11,900 Cash 9,800

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