Question

Consider each of the transactions below. All of the expenditures were made in cash.

a. The Edison Company spent $16,000 during the year for experimental purposes in connection with the development of a new product.
b. In April, the Marshall Company lost a patent infringement suit and paid the plaintiff $9,500.
c. In March, the Cleanway Laundromat bought equipment. Cleanway paid $10,000 down and signed a noninterest-bearing note requiring the payment of $20,000 in nine months. The cash price for this equipment was $27,000.
d. On June 1, the Jamsen Corporation installed a sprinkler system throughout the building at a cost of $32,000.
e. The Mayer Company, plaintiff, paid $16,000 in legal fees in November, in connection with a successful infringement suit on its patent.
f. The Johnson Company traded its old equipment for new equipment. The new equipment has a fair value of $11,200. The old equipment had an original cost of $9,400 and a book value of $4,200 at the time of the trade. Johnson also paid cash of $8,800 as part of the trade. The exchange has commercial substance.

Required:
Prepare journal entries to record each of the above transactions.

Answer 1

The question requires creating journal entries for specific business transactions involving cash expenditures, asset acquisition, and legal settlements, using the double-entry system.

Step-by-step explanation:

The question involves recording journal entries for various business transactions. Each transaction will be recorded according to the double-entry accounting system, where every transaction affects at least two accounts.

• a. Research and Development Expense 16,000
  Cash 16,000
• b. Legal Settlement 9,500
  Cash 9,500
• c. Equipment 27,000
  Notes Payable 20,000
  Cash 10,000
• d. Equipment 32,000
  Cash 32,000
• e. Legal Expenses 16,000
  Cash 16,000
• f. Equipment 11,200
  Accumulated Depreciation - Equipment 5,200
  Old Equipment 9,400
  Cash 8,800

The entries show expenditure, asset acquisition, and legal settlements.

Answer 2

Answer: See attachment

Step-by-step explanation:

The journals entry shows the transactions that Edison Company has undertaken. The transactions are shows both the debit and credit balances.

The attachments for the question have been attached for further analysis.