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:
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:
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7. A company receiving a donated asset will record:
a. an increase in revenue
b. an increase in liabilities
c. a decrease in liabilities
d. an increase in revenue and a decrease in liabilities
8. Alamos Co. exchanged equipment and $17,500 cash for similar equipment. The book value and the fair value of the old equipment were $81,800 and $90,300, respectively.
Assuming that the exchange has commercial substance, Alamos would record a gain/(loss) of:
a.$0
b. $8,500
c. $26,000
d. $(8,500)
9. On January 1, 2018, Kendall Inc. began construction of an automated cattle feeder system. The system was finished and ready for use on September 30, 2019. Expenditures on the project were as follows:
| January 1, 2018 | $ | 200,000 | |
| September 1, 2018 | $ | 300,000 | |
| December 31, 2018 | $ | 300,000 | |
| March 31, 2019 | $ | 300,000 | |
| September 30, 2019 | $ | 200,000 | |
Kendall borrowed $750,000 on a construction loan at 12% interest on January 1, 2018. This loan was outstanding throughout the construction period. The company had $4,500,000 in 9% bonds payable outstanding in 2018 and 2019.
Average accumulated expenditures for 2018 was:
a. $300,000
b. $350,000
c. $500,000
d. $400,000
10. On January 1, 2018, Dreamworld Co. began construction of a new warehouse. The building was finished and ready for use on September 30, 2019. Expenditures on the project were as follows:
| January 1, 2018 | $ | 323,000 | |
| September 1, 2018 | $ | 483,000 | |
| December 31, 2018 | $ | 483,000 | |
| March 31, 2019 | $ | 483,000 | |
| September 30, 2019 | $ | 323,000 | |
Dreamworld had $6,100,000 in 15% bonds outstanding through both years.
Dreamworld's capitalized interest in 2018 was:
a. $84,712
b. $48,450
c. $72,600
d. $96,900
11. Software development costs are capitalized if they are incurred:
a. Prior to the point at which technological feasibility has been established.
b. after commercial production has begun
c.After technological feasibility has been established but prior to the product availability date.
d. none of these answers
12.Cebrex Software began a new development project in 2017. The project reached technological feasibility on June 30, 2018, and was available for release to customers at the beginning of 2019. Development costs incurred prior to June 30, 2018, were $3,200,000 and costs incurred from June 30 to the product release date were $1,400,000. The economic life of the software is estimated at four years. For what amount will software be capitalized in 2018?
a. $0
b. $5,600,000
c. $1,400,000
d. $3,200,000
On August 1, 2016, Reliable Software began developing a softwareprogram to allow individuals to customize their investmentportfolios. Technological feasibility was established on January31, 2017, and the program was available for release on March 31,2017. Development costs were incurred as follows: |
| August 1through December 31, 2016 | $6,800,000 |
| January 1through January 31, 2017 | 1,250,000 |
| February 1through March 31, 2017 | 1,650,000 |
Reliable expects a useful life of five years for the softwareand total revenues of $8,500,000 during that time. During 2017,revenue of $2,550,000 was recognized. |
Required:
| 1. | Prepare the journal entries to record the development costs in2016 and 2017. (If no entry is required for atransaction/event, select "No journal entry required" in the firstaccount field.) |
