During the year end audit of Cressman Corporation's financial statement for 2019, you discover the following items: 1. Cressman capitalized $75,000 to the patent account at the beginning of 2018 for the cost of a patent. This amount included $50,000 of R&D costs. The patent was amortized over a 20-year life in 2018 and 2019. 2. At the beginning of 2018, Cressman paid its lawyers $8,000 to successfully defend a patent infringement suit regarding the patent in item 1. Cressman debited this cost to legal fees expense. 3. At the beginning of 2018, Cressman purchased a patent for $30,000 from the Baylor Company to prevent potential competition. It recorded the cost in the Patent account and amortized this cost over the remaining legal life of the patent obtained in item 1 (19 years). However, Cresssman agreed to a suggestion by the auditors that the life of the original patent obtained in Item 1 was protected for only 7 more years as of the beginning of 2020. Required. Prepare adjusting and correcting journal entries on December 31, 2019. 2018 is a closed year and any adjustments for that period need to be made in 2019.
During the year end audit of Cressman Corporation's financial statement for 2019, you discover the following items: 1. Cressman capitalized $75,000 to the patent account at the beginning of 2018 for the cost of a patent. This amount included $50,000 of R&D costs. The patent was amortized over a 20-year life in 2018 and 2019. 2. At the beginning of 2018, Cressman paid its lawyers $8,000 to successfully defend a patent infringement suit regarding the patent in item 1. Cressman debited this cost to legal fees expense. 3. At the beginning of 2018, Cressman purchased a patent for $30,000 from the Baylor Company to prevent potential competition. It recorded the cost in the Patent account and amortized this cost over the remaining legal life of the patent obtained in item 1 (19 years). However, Cresssman agreed to a suggestion by the auditors that the life of the original patent obtained in Item 1 was protected for only 7 more years as of the beginning of 2020. Required. Prepare adjusting and correcting journal entries on December 31, 2019. 2018 is a closed year and any adjustments for that period need to be made in 2019.
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter12: Intangibles
Section: Chapter Questions
Problem 3P
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