In 2018, Starsearch Corporation began work on three research and development pro
ID: 2553813 • Letter: I
Question
In 2018, Starsearch Corporation began work on three research and development projects. One of the projects was completed and commercial production of the developed product began in December. The company's fiscal year-end is December 31. All of the following 2018 expenditures were included in the R&D; expense account: Salaries and wages for: Lab research Design and construction of preproduction prototype Quality control during commercial production 490,000 350,000 39,000 Materials and supplies consumed for: 79,000 49,000 790,000 59,000 215,000 $2,071,000 Lab research Construction of preproduction prototype Purchase of equipment Patent filing and legal fees for completed project Payments to others for research Total $295,000 of equipment was purchased solely for use in one of the projects. After the project is completed, the equipment will be abandoned. The remaining $495,000 in equipment will be used on future R&D; projects. The useful life of equipment is five years Assume that all of the equipment was acquired at the beginning of the year Required Prepare journal entries, reclassifying amounts in R&D; expense, to reflect the appropriate treatment of the expenditures. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)Explanation / Answer
Answer:
Event
Description
Debit $
Credit $
1
Equipment
495000
Research and development expense
495000
2
Research and development expense
99000
Accumulated depreciation—equipment
99000
(495000/5)
3
Patent
59000
Research and development expense
59000
4
Inventory
39000
Research and development expense
39000
Quality control costs would either be treated as
manufacturing overhead and included in the cost
of inventory (as in this journal entry),
or expensed in the period incurred.
Event
Description
Debit $
Credit $
1
Equipment
495000
Research and development expense
495000
2
Research and development expense
99000
Accumulated depreciation—equipment
99000
(495000/5)
3
Patent
59000
Research and development expense
59000
4
Inventory
39000
Research and development expense
39000
Quality control costs would either be treated as
manufacturing overhead and included in the cost
of inventory (as in this journal entry),
or expensed in the period incurred.