Question

Axcel software began a new development project in 2020. the project reached technological feasibility on june 30, 2021, and was available for release to customers at the beginning of 2022. development costs incurred prior to june 30, 2021, were $3,200,000, and costs incurred from june 30 to the product release date were $1,400,000. the 2022 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. amortization of the software development costs for the year 2022 would be:

Answer 1

The amortization of the software development costs for the year 2022 would be $5,60,000.

What is Amortization?

Amortization is the process of repaying a debt in equal amounts over time. A portion of each payment is applied to the loan principal, while the remainder is applied to interest.

When a mortgage loan is amortized, the amount paid toward principal begins small and steadily increases month after month.

Computation:

According to the given information,

The revenues of 2022 from the sale of new software(Sales Revenue)= $4,000,000.

Anticipated Additional Revenues = $6,000,000

Then, the total revenue is :

$\text{Total Sales} = \text{Sales Revenue + AAR}\\\\\text{Total Sales} = \ 4,000,000+ \ 6,000,000\\\\\text{Total Sales} = \ 10,000,000$

Then, the percentage of Total Revenue would be:

$\text{Percentage of Total Revenue} = \dfrac{\text{Sales Revenue}}{\text{Tota Revenue}}\\\\\text{Percentage of Total Revenue} = \dfrac{\ 4,000,000}{\ 10,000,000}\\\\\text{Percentage of Total Revenue} = 40\%$

Then, the Cost incurred from June to the date of product release =

Therefore, the amortization of the software development costs for the year 2022:

$=\text{Cost incurred to product release} \times \text{percentage of Total Revenue}\\\\=\ 1,400,000 \times 40\% \\\\=\ 5,60,000$

Learn more about the Amortization, refer to:

brainly.com/question/24232991

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