![Exercise 10-26 (Algo) Research and development [LO10-8]<br>In 2021, Space Technology Company modified its model Z2 satellite to incorporate a new communication device. The company made<br>the following expenditures:<br>Basic research to develop the technology<br>Engineering design work<br>Development of a prototype device<br>Acquisition of equipment<br>Testing and modification of the prototype<br>Legal and other fees for patent application on the new communication system<br>Legal fees for successful defense of the new patent<br>$2,700,000<br>820,000<br>440,000<br>74,000<br>340,000<br>54,000<br>34,000<br>$4,462,000<br>Total<br>The equipment will be used on this and other research projects. Depreciation on the equipment for 2021 is $24,000.<br>During your year-end review of the accounts related to intangibles, you discover that the company has capitalized all of the above as<br>costs of the patent. Management contends that the device simply represents an improvement of the existing communication system of<br>the satellite and, therefore, should be capitalized.<br>Required:<br>Prepare correcting entries that reflect the appropriate treatment of the expenditures. (If no entry is required for a transaction/event,<br>select](https://s3.us-east-1.amazonaws.com/storage.unifolks.com/qimg-008/008_3giqzj0-2cf5rjju.jpeg)
Extracted text: Exercise 10-26 (Algo) Research and development [LO10-8] In 2021, Space Technology Company modified its model Z2 satellite to incorporate a new communication device. The company made the following expenditures: Basic research to develop the technology Engineering design work Development of a prototype device Acquisition of equipment Testing and modification of the prototype Legal and other fees for patent application on the new communication system Legal fees for successful defense of the new patent $2,700,000 820,000 440,000 74,000 340,000 54,000 34,000 $4,462,000 Total The equipment will be used on this and other research projects. Depreciation on the equipment for 2021 is $24,000. During your year-end review of the accounts related to intangibles, you discover that the company has capitalized all of the above as costs of the patent. Management contends that the device simply represents an improvement of the existing communication system of the satellite and, therefore, should be capitalized. Required: Prepare correcting entries that reflect the appropriate treatment of the expenditures. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) * Answer is not complete. No Transaction General Journal Debit Credit Research and development expense 4,500,000 X Patent 4,500,000 X
Extracted text: Acquisition of equipment Testing and modification of the prototype Legal and other fees for patent application on the new communication system Legal fees for successful defense of the new patent 74,000 340,000 54,000 34,000 Total $4,462,000 The equipment will be used on this and other research projects. Depreciation on the equipment for 2021 is $24,000. During your year-end review of the accounts related to intangibles, you discover that the company has capitalized all of the above as costs of the patent. Management contends that the device simply represents an improvement of the existing communication system of the satellite and, therefore, should be capitalized. Required: Prepare correcting entries that reflect the appropriate treatment of the expenditures. (If no entry is required for a transaction/event, select "No journal entry required" in the first account fleld.) X Answer is not complete. No Transaction General Journal Debit Credit 1 1 Research and development expense 4,500,000 X Patent 4,500,000 2 Equipment Patent 3 Research and development expense Accumulated depreciation - equipment