Question 1: A company formed on January 1 of the current year and entered into the following transactions:
A. Paid $15,000 for transportation and other expenses for incorporators' meetings.
B. Paid $10,000 attorney fees to form the corporation under state law.
C. Paid $12,000 deposit on the lease of office space.
D. Paid $65,000 to purchase furniture and equipment necessary to begin operations.
E. Paid an inventor $45,000 for his patent on a specialized electrical switch the company will manufacture.
F. Paid $12,000 for initial staff training necessary to begin operations.
Instructions:
Prepare the necessary journal entries to record the above transactions.
Question 2: During 2006, a company spent $140,000 in research and development costs that resulted in a new product. The new product was patented at a total cost of $14,000 including $3,000 in attorney fees and a $500 patent office filing fee. The patent was expected to have a useful life of 8 years.
In 2007, the company successfully defended a patent infringement lawsuit at a total cost of $8,000.
In 2008, the company determined that other products introduced into the market reduced the useful life of the patent and estimated that the patent would become worthless by the end of 2010.
Instructions:
Prepare all journal entries necessary to properly record all entries related to the product and patent for the years 2006 through 2010.