8.

In 2024, Space Technology Company modified its model Z2 satellite to incorporate a new communication device. The company made the following expenditures:

Basic research to develop the technology	$ 2,300,000
Engineering design work	740,000
Development of a prototype device	360,000
Acquisition of equipment	66,000
Testing and modification of the prototype	260,000
Legal and other fees for patent application on the new communication system	46,000
Legal fees for successful defense of the new patent	26,000
Total	$ 3,798,000

The equipment will be used on this and other research projects. Depreciation on the equipment for 2024 is $16,000.

During your year-end review of the accounts related to intangibles, you discover that the company has capitalized all of the above as costs of the patent. Management contends that the device simply represents an improvement of the existing communication system of the satellite and, therefore, should be capitalized.

Required:

Prepare correcting entries that reflect the appropriate treatment of the expenditures.

Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field.

9.

Early in 2024, the Excalibur Company began developing a new software package to be marketed. The project was completed in December 2024 at a cost of $11 million. Of this amount, $7 million was spent before technological feasibility was established. Excalibur expects a useful life of five years for the new product with total revenues of $15 million. During 2025, revenue of $6 million was recognized.

Required:

Prepare a journal entry to record the 2024 development costs.

Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in whole dollars and not in millions.

10.

The Manguino Oil Company incurred exploration costs in 2024 searching and drilling for oil as follows:

Well 101	$ 62,000
Well 102	72,000
Well 103	92,000
Wells 104108	380,000
Total	$ 606,000

It was determined that Wells 104108 were dry holes and were abandoned. Wells 101, 102, and 103 were determined to have sufficient oil reserves to be commercially successful.

Required:

1. Prepare a summary journal entry to record the indicated costs assuming that the company uses the full-cost method of accounting for exploration costs. All of the exploration costs were paid in cash.
2. Prepare a summary journal entry to record the indicated costs assuming that the company uses the successful efforts method of accounting for exploration costs. All of the exploration costs were paid in cash.

Note: For all requirements, if no entry is required for a transaction/event, select "No journal entry required" in the first account field.