P10-5

Prepare the necessary journal entry to clear the intangible asset account and to set up accounts for separate intangible assets, other types of assets, and expenses indicated by the transactions. Consider each of the transactions below. All of the expenditures were made in cash. The Edison Company spent $12,000 during the year for experimental purposes in connection with the development of a new product. In April, the Marshall Company lost a patent infringement suit and paid the plaintiff $7, 500 In March, the Cleanway Laundromat bought equipment. Cleanway paid $6,000 down and signed a noninterest-bearing note requiring the payment of $18,000 in nine months. The cash price for this equipment was $23,000. On June 1, the Jamsen Corporation installed a sprinkler system throughout the building at a cost of $28,000. The Mayer Company, plaintiff, paid $12,000 in legal fees in November, in connection with a successful infringement suit on its patent. The Johnson Company traded its old machine with an original cost of $7, 400 and a book value of $3,000 plus cash of $8,000 for a new one that had a fair value of $10,000. The exchange has commercial substance. Prepare journal entries to record each of the above transactions. Southern Company owns a building that it leases to others. The building's fair value is $1, 400,000 and its book value is $800,000 (original cost of $2,000,000 less accumulated depreciation of $1, 200,000). Southern exchanges this for a building owned by the Eastern Company. The building's book value on Eastern's books is $950,000 (original cost of $1, 600,000 less accumulated depreciation of $650,000). Eastern also gives Southern $140,000 to complete the exchange. The exchange has commercial substance for both companies