Reference no: EM132887435
Problem - Correct Classification of Intangibles - During the current year, Cartwright Corporation's accountant recorded numerous transactions in an account entitled Intangible Assets, as follows:
Jan. 2 Paid incorporation fees. $17,500
Jan. 11 Paid legal fees for the organization of the company. 7,500
Jan. 25 Paid for large-scale advertising campaign for the year. 15,000
Apr. 1 Acquired land for $15,000 and a building for $20,000 to house the R&D activities. The building has a 20-year life. 35,000
May 15 Purchased materials exclusively for use in R&D activities. Of these materials, 20% are left at the end of the year and will be used in the same project next year. (They have no alternative use.) 15,000
June 30 Paid expenses related to obtaining a patent. 10,000
Dec. 11 Purchased an experimental machine from an inventor. The machine is expected to be used for a particular R&D activity for 2 years, after which it will have no residual value. 12,000
Dec. 31 Paid salaries of employees involved in R&D. 30,000
Required - Prepare adjusting journal entries to eliminate the Intangible Assets account and correctly record all the items, including appropriate amortization adjustments. Cartwright amortizes patents over 10 years.