Correct Classification of Intangibles During the current year, Cartwright Corporation’s

accountant recorded numerous transactions in an account entitled Intangible Assets, as

follows: 

Jan. 2 Paid incorporation fees. $17,500 

Jan 2 Fees Dr 17500
Cash Cr 17500

11 Paid legal fees for the organization of the company. 7,500 

Jan 11 Legal Fee Dr 7500
Cash Cr 7500

25 Paid for large-scale advertising campaign for the year. 15,000 

Jan 25 Advtg Exp Dr 15000
Cash Cr 15000

Apr. 1 Acquired land for $15,000 and a building for $20,000 to house the R&D activities.
The building has a 20-year life. 35,000 
Apr 1 Land Dr 15000
Building Dr 20000
Cash Cr 35000

Dec 31 R&D Exp Dr 750

Accumulated Dep-Bldg Cr 750
(Depreictaion using SLN for 9 month = (20000/20)*(9/12) = 750)

May 15 Purchased materials exclusively for use in R&D activities. Of these materials,
20% are left at the end of the year and will be used in the same project next year. (They
have no alternative use.) 15,000 
May 15 R&D Material Dr 15000
Cash Cr 15000

Dec 31 R&D Exp Dr 12000

R&D Material Cr 12000

June 30 Paid expenses related to obtaining a patent. 10,000 

Jun 30 Patent Expenses Dr 10000
Cash Cr 10000

Dec. 11 Purchased an experimental machine from an inventor. The machine is

expected to be used for a particular R&D activity for 2 years, after which it will have no
residual value. 12,000 
Dec 11 Machine A/c Dr 12000
Cash Cr 12000

Dec 31 R&D Exp Dr 333

 Accumulated Dep Cr 333
(Dep for 20 days upto 31 Dec. 2 Yr Life. (12000/2)*(20/360) = 333)

31 Paid salaries of employees involved in R&D. 30,000 

Dec 31 R&D expenses Dr 30,000
Cash Cr 30,000
(Salary to R&D Staff is expensed as R&D Expenses)