P12-1B (Correct Intangible Asset Account) Dolphin Co., organized in 2013, has set up a single account for all intangible assets. The following summary discloses the debit entries that have been recorded during 2013 and 2014.

Intangible Assets

3/1/13 10-year franchise agreement; expires 2/28/24 3/1/13 Organization costs 4/1/13 Advance payment for 2 years for office space 6/30/13 Purchased a patent (8-year life)

9/1/13 Cost to develop a patent (10-year life) 12/31/13 Net operating loss for 2013 6/30/14 Research and development costs 9/1/14 Legal fee to successfully defend internally developed patent

Instructions

$ 60,000 7,000 24,000 80,000 40,000 61,000 265,000 13,500

Prepare the necessary entries to clear the Intangible Assets account and to set up separate accounts for distinct types of intangibles. Make the entries as of December 31, 2014, recording any necessary amortiza- tion and reflecting all balances accurately as of that date. (Ignore income tax effects.)

c12BProblems.indd

P12-4B (Accounting for R&D Costs) During 2012, Oak Company purchased a building site for its pro- posed research and development laboratory at a cost of $125,000. Construction of the building was started in 2012. The building was completed on December 31,2013, at a cost of $750,000 and was placed in service on January 2, 2014. The estimated useful life of the building for depreciation purposes was 25 years. The straight-line method of depreciation was to be employed, and there was no estimated salvage value.

Management estimates that about 40% of the projects of the research and development group will result in long-term benefits (i.e., at least 10 years) to the corporation. The remaining projects either benefit the current period or are abandoned before completion. A summary of the number of projects and the di- rect costs incurred in conjunction with the research and development activities for 2014 appears below.

Completed projects with long-term benefits Abandoned projects or projects that

benefit the current period Projects in processresults indeterminate

Number of Projects

10

16 8

Salaries and Employee Benefits

$ 83,000

135,000 64,000

Other Expenses (excluding Building Depreciation Charges)

$60,000

67,000 26,000

Total 34$282,000$153,000

Upon recommendation of the research and development group, Oak Company acquired a patent for manufacturing rights at a cost of $180,000. The patent was acquired on April 1,2013, and has an economic life of 8 years.

Instructions

If generally accepted accounting principles were followed, how would the items above relating to research and development activities be reported on the following financial statements?

(a) The companys income statement for 2014. (b) The companys balance sheet as of December 31, 2014.

Be sure to give account titles and amounts, and briefly justify your presentation.