Question
Larkspur Biotech is developing a new diagnostic test, Project Aster. It reports under US GAAP (ASC 730). All payments were made in cash during 2026.
| Date | Event |
|---|
| February 1 | Bought general laboratory equipment for $300,000. It will be used on this and future research projects (10-year life, no residual value, straight-line). |
| March 1 | Bought a specialized testing rig for $90,000. It can only be used on Project Aster and has no alternative future use. |
| June 30 | Paid research staff salaries of $180,000. Of this, $70,000 was incurred after the project reached technological feasibility. |
| September 15 | Paid an outside laboratory $60,000 for contract research performed on the project. |
| November 20 | Paid $12,000 of legal fees to register the resulting patent. |
| December 31 | Recorded depreciation on the general laboratory equipment for the 11 months it was in use. |
Required: Prepare the journal entries. Use Research and Development Expense, Equipment, Patents, Accumulated Depreciation - Equipment and Cash.
Scoring
- 40% Account naming / line matching
- 40% Amount correctness
- 20% Structure / section placement
How to approach this
IAS 1 — accrual basis; double-entry recording
Identify the accounts each transaction touches, decide the direction of each, and confirm total debits equal total credits before moving on. Write the debit line first, then the credit, and date each entry to the period the event belongs to rather than the date cash moved.
Common mistakes
- Recording an entry on the cash date when the transaction was on credit.
- Naming an account inconsistently across entries, so the ledger will not aggregate.
- Leaving an entry unbalanced, or balancing it by forcing a figure into a suspense account.
Further reading10 worked journal entry problems