Early in 2013, the Excalibur Company began developing a new software package to

Question

Early in 2013, the Excalibur Company began developing a new software package to be marketed. The project was completed in December 2013 at a cost of $6 million. Of this amount, $4 million was spent before technological feasibility was established. Excalibur expects a useful life of five years for the new product with total revenues of $10 million. During 2014, revenue of $3 million was recognized

1) Calculate the required amortization for 2014 using the straight line method

2) At what amount should the computer software costs be reported in the December 31, 2014, balance sheet? (Enter your answers in whole dollars.)

Software development cost $ 2,000,000

Less Amortizationto Date? ______________

NET?_________

Explanation / Answer

Answer:

Percentage of revenue method=600000 [(3/10*2)million]

SLM=400000 (2 million/5)

Answer:2)

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