Axcel Software began a new development project in 2010. The project reached tech

Question

Axcel Software began a new development project in 2010. The project reached technological feasibility on June 30, 2011 and was available for release to customers at the beginning of 2012. Development costs incurred prior to June 30, 2011 were $3,200,000 and costs incurred from June 30 to the product release date were $1,400,000. 2012 revenues from the sale of the new software were $4,000,000 and the company anticipates additional revenues of $6,000,000. The economic life of the software is estimated at four years. 2012 amortization of the software development costs would be:

Explanation / Answer

Total cost incurred during development = 3,200,000 +1,400,000 =$ 4,600,000 revenue from sales in 2012 = $ 4,000,000 additional revenue in each year = 6,000,000/4 = $1,500,000

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