Question
n 2021, Starsearch Corporation began work on three research and development projects. One of the projects was completed and commercial production of the developed product
n 2021, 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 2021 expenditures were included in the R&D expense account:
Salaries and wages for: | |||
Lab research | $ | 410,000 | |
Design and construction of preproduction prototype | 270,000 | ||
Quality control during commercial production | 31,000 | ||
Materials and supplies consumed for: | |||
Lab research | 71,000 | ||
Construction of preproduction prototype | 41,000 | ||
Purchase of equipment | 710,000 | ||
Patent filing and legal fees for completed project | 51,000 | ||
Payments to others for research | 175,000 | ||
Total | $ | 1,759,000 | |
$255,000 of equipment was purchased solely for use in one of the projects. After the project is completed, the equipment will be abandoned. The remaining $455,000 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.)
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1
Record entry to capitalize the cost of equipment to be used on future projects incorrectly charged to R&D expense.
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2
Record depreciation on equipment used in R&D projects.
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3
Record entry to capitalize filing and legal fees for patent incorrectly charged to R&D expense.
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4
Record the entry to reclassify the expenditures made for quality control during commercial production assuming the costs would be treated as manufacturing overhead.
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