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E 10-29 Software development costs

E 10-29 Software development costs
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ACCOUNTING

Intermediate Accounting, 6e, Spiceland
E 10-29 Software development costs

Early in 2011, the Excalibur Company began developing a new software package to be marketed. The project was completed in December 2011 at a cost of $6 million. Of this amount, $4 million was spent before technological feasibility was established. Excalibur expects a useful life of five years for the new product with total revenues of $10 million. During 2012, revenue of $4 million was recognized.

Required:
(1) Prepare a journal entry to record the 2011 development costs. (Enter your answers in millions. Omit the "$" sign in your response.)

(2) Calculate the required amortization for 2012. (Enter your answers in dollars not in millions. Omit the "$" sign in your response.)

(3) At what amount should the computer software costs be reported in the December 31, 2012, balance sheet? (Assume company uses Percentage-of-revenue method for amortization. Enter your answer in dollars not in millions. Omit the "$" sign in your response.)

 

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