Cost of Patents
Response to the following problem:
The Davis Research Company engaged in the following six transactions during 2010:
1. Purchased a patent for $35,000. Legal costs of $5,000 were also incurred.
2. Costs of improving patent:
Engineering costs $20,000
Assembling and testing prototypes 10,000
Other R&D costs 25,000
3. Sold a prototype machine for $7,000. The research and development were performed in previous years.
4. Licensed a manufacturing process to another company and received $80,000 as an advance payment.
5. Successfully defended a patent infringement suit at a cost of $12,000.
6. Earned $5,000 of the advance payment on the licensed manufacturing process in Item 4.
Required
Prepare journal entries to record the preceding transactions.