Answer:
1. Prepare the journal entries to record the development costs in 2021 and 2022. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
December 31, 2021
Dr Research and development expenses 2,300,000
Cr Cash 2,300,000
February 28, 2022
Dr Research and development expenses 900,000
Cr Cash 900,000
April 30, 2022
Dr Software development 500,000
Cr Cash 500,000
2. Calculate the required amortization for 2022. (Enter your answer in whole dollars.)
- $66,667 (8 months, from May to December)
Explanation:
development costs:
September 30, 2021 to December 31, 2021 = $2,300,000
January 1, 2022 to February 28, 2022 = $900,000
R&D costs that must be expensed = $3,200,000
R&D costs that can be capitalized (after technological feasibility is obtained) = $500,000
Software developing companies can capitalize costs incurred after technological feasibility but before the software is launched.
Capitalized costs can be amortized over 60 months:
$500,000 x 8/60 = $66,666.67
