HOW DO I JOURNALIZE FOR THIS ONE:

During 2005, Rubeus Erectus spent $45,000 in research and development costs. This resulted in the development of a valuable new patent for setting the foundations for a tall building. The Core Engineering Company acquired a patent from another company for $45,000. The patents for Rubeus Erectus Inc. and Core Engineering Company are expected to last 8 years and both have a 17-year useful life.

In the first situation the costs are expensed as R&D costs in the period. The journal entry is Debit R&D Expense (Income statement acocunt) for the amount and Credit Cash for the amount. For the second situation the journal entry is: Debit Patents (Balance Sheet account -Intangible Asset) for the amount and Credit cash for the amount.