Exercise 2: Costs of Intangible Assets

Womack Corporation was organized in early 2018. During its first quarter, Womack had the following cash expenditures:

Attorneys fees in connection with the organization of the corporation $30,000

State filing fees and other incorporation costs 7,500

Purchase of furniture and equipment 50,000

Purchase of a patent 85,000

Legal and other fees for transfer of the patent 6,000

Advertising costs 10,000

Research and development costs 12,500

Total $201,000

Which costs should be capitalized? Which costs should be expensed?

Prepare a summary journal entry to record the $201,000 in cash expenditures.