Question

During 20X1, the Balboa 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 20X1 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 amount of the software development costs would be capitalized in 20X1 (ignore amortization)

Answer 1

Answer:

$400,000

Explanation:

Data provided in the question:  

Development cost incurred = $2,000,000  

Amount incurred after the technological feasibility was achieved = $400,000

Now,  

The Software development costs that would be capitalized in 20X1

= Cost incurred after achievement of technological feasibility    

= $400,000