The time and cost required to manufacture its product R&Dcosts were $120,000. The process...

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Accounting

The time and cost required to manufacture its product R&Dcosts were $120,000. The process was patented. On July 1, 2016.Legal costs and fees to require the patent totaled $12,500. Browenestimated the useful life of the patent at 10 years.
On July 1,2018, Browen sold the nonexclusive right to use thenew process to Kennedy Company for $90,000. Because Bowen retainedthe patent, the agreement allows Kennedy to use, but not sell, thenew technology for a period of 5 years. But Bowen Company andKennedy Company have December 31 fiscal years.
On July 1, 2020, another competitor obtained a patent on a newprocess that made Browen's patent obsolete.
1) How should Bowen Company account for the R&D costs andlegal costs incurred to obtain the patent? Show the effects ofthese entries using the financial statement effects template,prepare the appropriate journal entries necessary to account forthe costs incurred in 2016, and psot the entries to T-accounts

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4.3 Ratings (851 Votes)

Research and development cost incurred for developing the patent are not recorded as
an intangible asset rather it is expensed in income statement. Whereas legal costs and
fees paid to acquire patent in capitalized and recorded in balance sheet

Journal entries
Research and Development cost	$120,000
Cash		$120,000

Legal cost-Patent	$12,500
Cash		$12,500

T Accounts

Research and Development cost

Cash

2016

$120,000

2016

$120,000

2016

$12,500

Patent

2016

$12,500

Assets

Liabilities

Equity

Contributed Capital

Retained Earnings

Cash

Accounts Receivable

Intangible asset

Land

Accounts Payable

Common Stock

Dividend

Revenue

R&D Expense

Other Expense

2016

($132,500)

$12,500

$120,000

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In: AccountingThe time and cost required to manufacture its product R&Dcosts were $120,000. The process was...The time and cost required to manufacture its product R&Dcosts were $120,000. The process was patented. On July 1, 2016.Legal costs and fees to require the patent totaled $12,500. Browenestimated the useful life of the patent at 10 years.On July 1,2018, Browen sold the nonexclusive right to use thenew process to Kennedy Company for $90,000. Because Bowen retainedthe patent, the agreement allows Kennedy to use, but not sell, thenew technology for a period of 5 years. But Bowen Company andKennedy Company have December 31 fiscal years.On July 1, 2020, another competitor obtained a patent on a newprocess that made Browen's patent obsolete.1) How should Bowen Company account for the R&D costs andlegal costs incurred to obtain the patent? Show the effects ofthese entries using the financial statement effects template,prepare the appropriate journal entries necessary to account forthe costs incurred in 2016, and psot the entries to T-accounts

The time and cost required to manufacture its product R&Dcosts were $120,000. The process...

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Accounting

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