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Homework answers / question archive / 16
16. Legal fees incurred in successfully defending a patent suit should be capitalized when the patent has been Internally Purchased from Developed an Inventor (2 points) Yes Yes Yes No No Yes No No
Question 1 : Accounting Cycle Mike Brudu began operations on January 1, 2017. The trial balance columns for the Quarter Ended March 31, 2017 shown below: Dr. Cr. Cash 11,400 Accounts Receivable 5,620 1,050 Supplies Prepaid Insurance Equipment 2,400 30,000 10,000 12,350 Notes Payable Accounts Payable Owner's Capital Owner's Drawings 20,000 600 Service Revenue 13,620 Salaries and Wages Expense 2.200 Travel Expense 1,300 1,200 Rent Expense Miscellaneous Expense 200 55,970 55,970 Other data: 1. Supplies on hand total $480. 2. Depreciation is $800 per quarter. 3. Interest accrued on 6-month note payable, issued January 1, $300. 4. Insurance expires at the rate of $200 per month. 5. Services performed but unbilled at March 31 total $1,030.
Instructions (a) Prepare an income statement and owner's equity statement for the quarter and a classified balance sheet at March 31. M. Brudu did not make any additional investments in the business during the quarter ended March 31, 2017. (b) Journalize the adjusting entries. (c) Prepare adjusted trial balance (d) Journalize the closing entries (e) Prepare post-closing trial balance (1) Prepare the Income statement and owner's equity Statement and classified balance sheet at March 31.
16 Correct option is Yes Yes (i.e. first)
Patent is an exlusive right granted to an inventor that allow them to exclude all other for making, using or selling their invention for specified period of time.
In the given both cases legal expenses incurred in successfully defending a patent should be capitalized because such suit underlie legal right of the holder of patent.
1
SOL:
A. Income statement for quarter at march 31
dr. cr.
Service revenue 13620
salaries and wages expenses 2200
travel expense 1300
rent expense 1200
miscellaneous expenses 200
net prfit 8720
total 13620 13620
Owners equity statement for quarter at march 31
owners capital retained earnings total
begining balance 20000 20000
drawings - (600) (600)
net income 8720 8720
19800 8720 28120
Balancesheet fo rquarter at march 31
LIABILITIES ASSESTS
current liabilities current assets
notes payable 10000 supplies 1050
accounts payable 12350 accounts recievable 5620
prepaid insurance 2400
cash 11400
total current liability 22350 total current asset 20470
share holder equity fixed assets
capital 19400 equipment 30000 retained earnings 8720
total sharehoders equity 28120 total fixed assets 30000
total 50470 50470
b. Adjusting entries
1. supply on hand
debit credit
supply expense 480
supplies 480
2. depreciation
depreciation expenses 800
Accumulated depreciation 800
3.interest accured on 6 months notes payable
interest expense 150
interest payable 150
4. insurance expires
expired insurance 600
prepaid insurance 600
5. service performed but unbilled
accounts receivable 1030
service revenue 1030
c. adjusted trail balance
debit credit
Accounts receivable 6650
cash 11400
supplies 570
prepaid insurance 1800
equipment 29200
notes payable 10150
accounts payable 12350
owners capital 20000
drawings 600
service revenue 14650
salary and wages expense 2200
travel expense 1300
rent expense 1200
miscellaneous expenses 200
supply expenses 480
depreciation expenses 800
interest expense 150
insurance expense 600
total 57150 57150
