Determining Cost of Patent
Chen King Enterprises Inc. developed a new machine that reduces the time required to insert the fortunes into its fortune cookies. Because the process is considered very valuable to the fortune cookie industry, Chen King patented the machine. The following expenses were incurred in developing and patenting the machine:
|
Research and development laboratory expenses |
$25,000 |
|
Metal used in the construction of the machine |
8,000 |
|
Blueprints used to design the machine |
3,200 |
|
Legal expenses to obtain patent |
12,000 |
|
Wages paid for the employees’ work on the research, development, and building |
|
|
of the machine (60% of the time was spent in actually building the machine) |
30,000 |
|
Expense of Dr. awing required by the patent office to be submitted with the patent application |
1,700 |
|
Fee paid to government patent office to process application |
2,500 |
One year later, Chen King Enterprises Inc. paid $17,500 in legal fees to successfully defend the patent against an infringement suit by Dr. agon Cookie Co. Give the entries on Chen King’s books indicated by the preceding events. Ignore any amortization of the patent or depreciation of the machine.