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Elena L [17]
3 years ago
11

On September 30, 2021, Athens Software began developing a software program to shield personal computers from malware and spyware

. Technological feasibility was established on February 28, 2022, and the program was available for release on April 30, 2022. Development costs were incurred as follows:
September 30 through December 31, 2021 $3,600,000
January 1 through February 28, 2022 1,500,000
March 1 through April 30, 2022 594,000

Athens expects a useful life of four years for the software and total revenues of $7,800,000 during that time. During 2022, revenue of $1,560,000 was recognized.

Required:
a. Prepare a journal entry to record the development costs in each year of 2021 and 2022.
b. Calculate the required amortization for 2022.
Business
1 answer:
lawyer [7]3 years ago
5 0

Answer:

2021

Dr Research and development expense $3,600,000

Cr Cash $3,600,000

2022

Dr Research and development expense 1,500,000

Dr Software and development costs 594, 000

Cr Cash 2,094,000

B. $148,500

Explanation:

1. Preparation of the journals entry

2021

Dr Research and development expense $3,600,000

Cr Cash $3,600,000

(To record the expenses incurred on research and development)

2022

Dr Research and development expense 1,500,000

Dr Software and development costs 594, 000

Cr Cash 2,094,000

(1,500,000+594,000)

(To record the software development costs incurred)

2.Calculatation for the amortization for 2022

Using percentage of revenues method

Amortization= Current revenue/Total revenue* Software development costs

Amortization=$1,560,000/$7, 800,000*$594,000

Amortization=0.2*$594,000

Amortization=$118,800

Using straight line method

Amortization =1/Useful life* Software devel opment costs

Amortization=1/4*$594,000

Amortization=$148,500

Based on the above calculation Tmte expense amounts under straight-line method is higher . Which means that , the amortization is $148,500.

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