Early in 2021, the Excalibur Company began developing a new software package to be marketed. The project was completed in December 2021 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 2022, revenue of $3 million was recognized.Required:Prepare a journal entry to record the 2021 development costs.

Early in 2021, the Excalibur Company began developing a new software package to be marketed. The project was completed in December 2021 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 2022, revenue of $3 million was recognized.Required:Prepare a journal entry to record the 2021 development costs.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 18P

See similar textbooks

Similar questions

On March 1, 2019, Elkhart enters into a new contract to build a specialized warehouse for 7 million. The promise to transfer the warehouse is determined to be a performance obligation. The contract states that if the warehouse is usable by November 30, 2019, Elkhart will receive a bonus of 600,000. For every week after November 30 that the warehouse is not usable, the bonus will decrease by 150,000. Elkhart provides the following completion schedule: Required: 1. Assume that Elkhart uses the expected value approach. What amount should Elkhart use for the transaction price? 2. Assume that Elkhart uses the most likely amount approach. What amount should Elkhart use for the transaction price? 3. Next Level What is the purpose of assessing whether a constraint on the variable consideration exists?
Micropolis Technology began a new development project in 2020. The project reached technological feasibility on September 1, 2021, and was available for release to customers at the beginning of 2022. Development costs incurred prior to September 1, 2021, were $4,560,000, and costs incurred from June 30 to the product release date were $1,920,000. The 2022 revenues from the sale of the new software were $3,950,000, and the company anticipates additional revenues of $11,850,000. The economic life of the software is estimated at three years. Amortization of the software development costs for the year 2022 would be:
During 2020, BLACKPINK INC. incurred costs to develop and produce a routine, low-risk computer software product as follows: • Completion of detailed program design or working model- 1,000,000 • Cost incurred for coding and testing to establish technological feasibility- 200,000 • Other coding costs after the establishment of technological feasibility- 2,000,000 • Other testing costs after the establishment of technological feasibility- 1,500,000 • Costs of producing product masters for training materials- 2,500,000 • Duplication of computer software and training materials from product master- 3,000,000 • Production overhead- 1,000,000 • Packaging product- 500,000 • Administrative overhead- 750,000 • Promotional cost of the finished software- 200,000 • Abnormal amount of wasted materials and labor costs- 250,000 In the December 31, 2020 balance sheet, what amount should be reported as inventory?
In February 2021, Culverson Company began developing a new software package to be sold to customers. The software allows people to enter health information and daily eating and exercise habits to track their health status. The project was completed in November 2021 at a cost of $800,000. Of this amount, $300,000 was spent before technological feasibility was established. Culverson expects a useful life of two years for the new product and total revenues of $1,500,000. Determine the amount that Culverson should capitalize as software development costs in 2021.
During 2019, Latte Inc., spent P5,000,000 developing its new "Hyperion" software package. Of this amount, P2,200,000 was spent before technological feasibility was established for the product, which is to be marketed to third parties. The package was completed at December 31, 2019. Latte expects a useful life of 8 years for this product with total revenues of P16,000,000. During the first year (2020), Latte realizes revenues of P3,200,000 a. What journal entries should have been prepared by the accountant in 2019 for the foregoing facts? b. Prepare the entry to record amortization at December 31, 2020
During 2020, TULIP Corporation incurred costs to develop and produce a routine, low-risk computer software product as follows: Packaging product (500 units) -₱90,000; Duplication of computer software and training materials from product masters (1,000 units) -₱250,000; Completion of detailed program design -₱130,000; Cost of producing product masters for training materials -₱150,000; Other testing costs after establishment of technological feasibility -₱200,000; Costs incurred for coding and testing to establish technological feasibility -₱100,000; Other coding costs after establishment of technological feasibility -₱240,000. In TULIP's December 31, 2020 statement of financial position, what amount should be capitalized as software cost subject to amortization?
During 2020, TULIP Corporation incurred costs to develop and produce a routine, low-risk computer software product as follows: Packaging product (500 units) -₱90,000; Duplication of computer software and training materials from product masters (1,000 units) -₱250,000; Completion of detailed program design -₱130,000; Cost of producing product masters for training materials -₱150,000; Other testing costs after establishment of technological feasibility -₱200,000; Costs incurred for coding and testing to establish technological feasibility -₱100,000; Other coding costs after establishment of technological feasibility -₱240,000. In TULIP's December 31, 2020 statement of financial position, what amount should be capitalized as software cost subject to amortization? * a. ₱ 570,000 b. ₱ 690,000 c. ₱ 540,000 d. ₱ 590,000
During 2020, TULIP Corporation incurred costs to develop and produce a routine, low-risk computer software product as follows: Packaging product (500 units) -₱90,000; Duplication of computer software and training materials from product masters (1,000 units) -₱250,000; Completion of detailed program design -₱130,000; Cost of producing product masters for training materials -₱150,000; Other testing costs after establishment of technological feasibility -₱200,000; Costs incurred for coding and testing to establish technological feasibility -₱100,000; Other coding costs after establishment of technological feasibility -₱240,000. In TULIP's December 31, 2020 statement of financial position, what amount should be capitalized as software cost subject to amortization? * ₱ 540,000 ₱ 590,000 ₱ 570,000 ₱ 690,000
On August 1, 2021, Reliable Software began developing a software program to allow individuals to customize their investment portfolios. Technological feasibility was established on January 31, 2022, and the program was available for release on March 31, 2022. Development costs were incurred as follows: August 1 through December 31, 2021 $ 6,400,000 January 1 through January 31, 2022 1,210,000 February 1 through March 31, 2022 1,610,000 Reliable expects a useful life of five years for the software and total revenues of $8,100,000 during that time. During 2022, revenue of $2,106,000 was recognized. Required:Prepare the journal entries to record the development costs in 2021 and 2022.
During 2024, a software company incurred development costs of $2,000,000 related to a new software project. Of this amount, $400,000 was incurred after technological feasibility was achieved. The project was completed in the middle of the year and the product was available for release to customers on July 1. Revenues from the sale of the new software in 2024 were $500,000 and the company anticipated future additional revenues of $4,500,000. The economic life of the software is estimated at four years. What is amortization in 2024?
Axcel Software began a new development project in 2015. The project reached technological feasibility on June 30, 2016, and was available for release to customers at the beginning of 2017. Development costs incurred prior to June 30, 2016, were $3,200,000 and costs incurred from June 30 to the product release date were $1,400,000. The 2017 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. Capitalized software costs are: A. $0. B. $3,200,000. C. $1,400,000. D. $4,600,000
A company began a new software development project in 2023. The project reached technological feasibility on June 30, 2024, and was available for release to customers at the beginning of 2025. Development costs incurred prior to June 30, 2024, were $3,260,000 and costs incurred from June 30, 2024, to the product release date were $1,460,000. The economic life of the software is estimated at four years. For what amount will software be capitalized in 2024?