Explanation Research and Development Expenditure: Expenditures incurred for the purpose of research or generation of new technology, products or service is known as research and development expenditure. Formula to calculate total research and development expenses is as follows: Research and Development expense = Technician's salary + Cost of material + Supplies Substitute $325,000 for technician’s salary, $137,500 for cost of material, $23,500 for supplies in the formula, Research and Development expense = $ 325 , 000 + $ 137 , 500 + $ 23 , 500 = $ 486 , 000 Journal entry to record research and development expenses is as follows: Date Account Title and Explanation Ref. Debit ($) Credit ($) Research and development expenses 486,000 Cash 486,000 (Being research and development expenses recorded) Table (1) Research and development expense are charged as expense in income statement, and expenses have debit balance as per the general rule, therefore research and development expenses are debited in the journal entry. Cash is an asset, assets are credited when their value decrease; payment of research and development expenses caused the cash to decrease and therefore the cash account is credited in the journal entry. Journal entry to record engineer’s salary is as follows: Date Account Title and Explanation Ref. Debit ($) Credit ($) Engineer’s Salary 87,000 Cash 87,000 (Being engineer’s salary recorded) Table (2) Engineer’s salary is considered as development asset as per IFRS, Asset have debit balance and are debited in journal entry, therefore engineer’s salary is debited in the journal entry. Cash is an asset, assets are credited when their value decrease; payment of research and development expenses caused the cash to decrease and therefore the cash account is credited in the journal entry. Journal entry to record acquisition of diagnostic equipment is as follows: Date Account Title and Explanation Ref. Debit ($) Credit ($) Diagnostic Equipment 500,000 Cash 500,000 (Being acquisition of diagnostic equipment recorded) Table (3) Diagnostic equipment is treated as fixed asset because it can benefit for a long period of time, assets are debited with the increase in value; Acquisition of diagnostic equipment cause its value to increase and therefore it is debited in the journal entry

2nd Edition

ISBN: 9780134730370

Author: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella

Publisher: PEARSON

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Chapter 11, Problem 11.27E

To determine

To prepare: Journal entries to record the activities for the current year.

Given Information:

Cost of diagnostic equipment is $500,000.

Salary of technicians is $325,000.

Cost of testing material is $137,500.

Cost of supplies used in testing is 23,500.

Salary of engineers is $87,000.

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Chapter 11, Problem 11.26E

Chapter 11, Problem 11.28E

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Journal entries to record the activities for the current year. Given Information: Cost of diagnostic equipment is $500,000. Salary of technicians is $325,000. Cost of testing material is $137,500. Cost of supplies used in testing is 23,500. Salary of engineers is $87,000.

Solution Summary: The author explains that research and development expenses are incurred for the purpose of research or generation of new technology, products or service.

Concept explainers

To prepare: Journal entries to record the activities for the current year. Given Information: Cost of diagnostic equipment is $500,000. Salary of technicians is $325,000. Cost of testing material is $137,500. Cost of supplies used in testing is 23,500. Salary of engineers is $87,000.

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Chapter 11 Solutions

To prepare: Journal entries to record the activities for the current year.

Given Information:

Cost of diagnostic equipment is $500,000.

Salary of technicians is $325,000.

Cost of testing material is $137,500.

Cost of supplies used in testing is 23,500.

Salary of engineers is $87,000.