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Margaret Avery Company from time to time

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E12-16 (Accounting for R & D Costs) Margaret Avery Company from time to time embarks on a research program when a special project seems to offer possibilities. In 2011, the company expends
325,000 on a research project, but by the end of 2011 it is impossible to determine whether any benefit will be derived from it.

a) The project is completed in 2012, and a successful patent is obtained. The R&D costs to complete the project are $130,000. The administrative and legal expenses incurred in obtaining patent number 472-1001-84 in 2012 total $24,000. The patent has an expected useful life of 5
years. Record these costs in journal entry form. Also, record patent amortization (full year) in 2012.

b) In 2013, the company successfully defends the patent in extended litigation at a cost of
$47,200 thereby extending the patent life to December 31, 2020. What is the proper way to account for this cost? Also, record patent amortization (full year) in 2013.


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