Question

Brick Oven Corporation made the following expenditures during the first month of operations:

Attorneys' fees to organize the corporation $8,000
Purchase of a patent 30,000
Legal and other fees for transfer of the patent 2,000
Advertising 70,000
Total $110,000

Required:
Record the $110,000 in cash expenditures.

Answer 1

The answer is given below;

Step-by-step explanation:

Patent ($30,000+$2,000) Dr.$32,000

Advertising Expense Dr.$70,000

Legal Fees Expense Dr.$8,000

Cash Cr.$110,000

Please note that purchase cost of patent and legal fees paid for the transfer of patent are capital expenditures, therefore they are capitalized.

Where as the advertising and attorney's fee are revenue expenditures.