Early in 2013, the Excalibur Company began developing a new software package to
ID: 2471780 • Letter: E
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 $15 million. Of this amount, $12 million was spent before technological feasibility was established. Excalibur expects a useful life of five years for the new product with total revenues of $18 million. During 2014, revenue of $9 million was recognized.
Prepare a journal entry to record the 2013 development costs. (Enter your answers in whole dollars. If no entry is required for an event, select "No journal entry required" in the first account field.)
Calculate the required amortization for 2014. (Enter your answers in whole dollars.)
At what amount should the computer software costs be reported in the December 31, 2014, balance sheet? (Enter your answers in whole dollars.)
Required:Explanation / Answer
The company would expense the cost spent before prior to the establishment of technological feasibility and capitalize the 3m in costs incurred between technological feasibility and the start of commercial production
Journal entry
Research and development
$12m
To Cash
$12m
The cost of 3m will be capitalized
Amortisation amount = 3m/18*9m = 1.50 m
( the percent of revenue method is used)
AT the year end it will be reported at 1.5m in the balance sheet
The company would expense the cost spent before prior to the establishment of technological feasibility and capitalize the 3m in costs incurred between technological feasibility and the start of commercial production
Journal entry
Research and development
$12m
To Cash
$12m
The cost of 3m will be capitalized
Amortisation amount = 3m/18*9m = 1.50 m
( the percent of revenue method is used)
AT the year end it will be reported at 1.5m in the balance sheet
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