Research and development
Response to the following problem:
In 2016, 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 yearend is December 31. All of the following 2016 expenditures were included in the R&D expense account:
Salaries and wages for:
Lab research $ 300,000
Design and construction of preproduction prototype 160,000
Quality control during commerce's/ production 20,000
Materials and supplies consumed for
Lab research 30,000
Construction of preproduction prototype 30,000
Purchase of equipment 600,000
Patent filing and legal fees for completed project 40,000
Payments to others for research 120,000
Total $1,330,000
$200,000 of equipment was purchased solely for use in one of the projects. After the project is completed, the equipment will be abandoned. The remaining $400,000 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.