Consider each of the transactions below. All of the expenditures were made in cash. The Edison Company spent $25,000 during the year for experimental purposes in connection with the development of a new product.
In April, the Marshall Company lost a patent infringement suit and paid the plaintiff $8,500.
In March, the Cleanway Laundromat bought equipment. Cleanway paid $19,000 down and signed a noninterest-bearing note requiring the payment of $24,500 in nine months. The cash price for this equipment was $38,000.
On June 1, the Jamsen Corporation installed a sprinkler system throughout the building at a cost of $41,000.
The Mayer Company, plaintiff, paid $25,000 in legal fees in November, in connection with a successful infringement suit on its patent.
The Johnson Company traded its old machine with an original cost of $13,900 and a book value of $6,900 plus cash of $10,600 for a new one that had a fair value of $13,900. The exchange has commercial substance.