Listed Below Are Several Transactions That Occurred During the Year

question 44

Essay

Listed below are several transactions that occurred during the year. In each case, all the amounts were debited to an account called "R and D costs." At the end of the year the company wants this account closed out and the amounts either expensed or capitalized to an asset account called "Development costs." a. During the year $5,500,000 was paid to staff to investigate whether a drug combination was effective for reducing a specific type of cancer in mice. Evidence showed it materially reduced the effects of this cancer in the mice.
b. During the year $12,000,000 was paid to staff to investigate whether a drug combination was effective for reducing a specific type of cancer for terminally ill cancer patients. The trials were successful in a limited number of cases but the results were mixed.
c. During the year $44,000,000 was paid to staff to investigate whether a drug combination was effective in reducing a specific type of cancer. The drug was very successful in most cases. Market research shows a huge market for this drug. The Board has committed further resources to complete the development of this project and to market the drug.
d. During the year $41,000,000 was paid to staff to investigate whether a drug combination was effective in reducing a specific type of cancer. The drug combination was very successful in most cases. Market research shows huge a market for this drug combination. The company is too small and does not have adequate funds to complete the balance of the drug testing, so it is looking for a large pharmaceutical firm to take it over and complete the process.
Required:
Prepare the journal entry required for each case. Explain your proposed treatment.

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Definitions:

Federal Arbitration Act

A United States federal law that provides for the enforcement of arbitration agreements and governs the proceedings of arbitration in commercial disputes.

Arbitration Act of 1980

Legislation that governs the process of arbitration, a form of alternative dispute resolution, in specific jurisdictions, facilitating and regulating the settling of disputes outside the court system.

Interstate Commerce

Refers to any trade, traffic, or transportation within the U.S. that crosses state boundaries or affects more than one state.

Arbitration Clause

A clause in a contract providing that, in case of a dispute, the parties will determine their rights through arbitration rather than through the judicial system.