Early in 2016, the Excalibur Company began developing a new software package to be marketed.
The project was completed in December 2016 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 2017, revenue of $3 million was recognized.
1. Prepare a journal entry to record the 2016 development costs.
Event General Journal Debit Credit
2. Calculate the required amortization for 2017.
Method Required Amortization
Percentage-of-revenue method
Straight-line method
3. At what amount should the computer software costs be reported in the December 31, 2017, balance sheet?
Balance Sheet
Software Development Costs
Less: Amortization to date
Net
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