Question

On December 31, year 3, Byte Co. had capitalized software costs of $600,000 with an economic life of four years. Sales for year 4 were 10% of expected total sales of the software. At December 31, year 4, the software had a net realizable value of $480,000. In its December 31, year 4 balance sheet, what amount should Byte report as net capitalized cost of computer software?
a. $432,000
b. $450,000
c. $480,000
d. $540,000

Answer 1

Answer:

correct option is b. $450,000

Explanation:

given data

capitalized software costs = $600,000

expected total sales = 10%

sale = 4 year

net realizable value = $480,000

solution

we get here net capitalized cost of computer software that is express as

net capitalized cost of computer software =  Year 1 balance - Year 2 amortization .................1

here

Year 2 amortization is

Year 2 amortization = capitalized software costs ÷ total projected sale .......2

Year 2 amortization = $\frac{600000}{4}$  

Year 2 amortization = $150,000

so here

Year 2 net capitalized cost is = $600,000 - $150,000

Year 2 net capitalized cost is  $450000

so correct option is b. $450,000