Correct Classification of Intangibles During the current year, the accountant for the Cartwright Corporation recorded numerous transactions in an account labeled Intangibles as follows:
|
Jan. 2 |
Incorporation fees |
$17,500 |
|
Jan. 10 |
Legal fees for the organization of the company |
7,500 |
|
Jan. 25 |
Paid for large scale advertising campaign for the year |
15,000 |
|
Apr. 1 |
Acquired land for $15,000 and a building for $20,000 to house the R&D activities. The building has a 20 year life. |
35,000 |
|
15 May |
Purchased materials exclusively for use in R&D activities. Of these materials, 20% are left at the end of the year and will be used in the same project next year. (They have no alternative use.) |
15,000 |
|
30 Jun |
Filed for a patent |
10,000 |
|
1 Jul |
Operating loss for first six months of the year |
12,000 |
|
Dec. 11 |
Purchased an experimental machine from an inventor. The machine is expected to be used for a particular R&D activity for two years, after which it will have no residual value. |
12,000 |
|
Dec. 31 |
Paid employees involved in R&D |
30,000 |
Required
Prepare adjusting journal entries to eliminate the Intangibles account and correctly record all the items. The company amortizes patents over 10 years.