Acquisition costs; journal entries
Consider each of the transactions below. All of the expenditures were made in cash.
1. The Edison Company spent $24,000 during the year for experimental purposes in connection with the development of a new product.
2. In April, the Marshall Company lost a patent infringement suit and paid the plaintiff $8,000.
3. In March, the Cleanway Laundromat bought equipment. Cleanway paid $18,000 down and signed a noninterest-bearing note requiring the payment of $24,000 in nine months. The cash price for this equipment was $37,000.
4. On June 1, the Jamsen Corporation installed a sprinkler system throughout the building at a cost of $40,000.
5. The Mayer Company, plaintiff, paid $24,000 in legal fees in November, in connection with a successful infringement suit on its patent.
6. The Johnson Company traded its old equipment for new equipment. The new equipment has a fair value of $13,600. The old equipment had an original cost of $13,400 and a book value of $6,600 at the time of the trade. Johnson also paid cash of $10,400 as part of the trade. The exchange has commercial substance.
Required:
Prepare journal entries to record each of the above transactions.
Answers: 3
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Acquisition costs; journal entries
Consider each of the transactions below. All of the expenditures...
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