During the current year, Bashful Company incurred the following costs to develop and produce a routine, low-risk computer software product: Completion of detailed program design or working model Cost incurred for coding and testing to establish technological feasibility Other coding costs after establishment of technological feasibility Other testing costs after establishment of technological feasibility Costs of producing product masters for training materials Duplication of computer software and training materials from product master Packaging product 1,300,000 1,000,000 2,400,000 2,000,000 1,500,000 2,500,000 900,000 What amount should be capitalized initially as software cost?
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- During 2020, Pitt Corporation incurred costs to develop and produce a routine, low- risk computer software product as follows:Completion of detailed program design 130,000Costs incurred for coding & testing to establish technological feasibility 100,000 Other coding costs after establishment of technological feasibility 240,000Other testing costs after establishment of technological feasibility 200,000Cost of producing product masters for training materials 150,000Duplication of computer software and training materials from productmasters (1,000 units) 250,000Packaging…Abby Inc. is an established computer software company. In 2009, the firm incurred the following costs in the process of designing, developing and producing a new software program using a certain technology to access the Internet: Designing and planning P1,800,000 Code development 2,700,000 Testing 900,000 Production of product master 4,500,000 In 2010, Abby incurred P1,800,000 in costs to produce the software program for sale in 2010. The costs of designing and planning, code development and testing were all incurred before the technological feasibility of the product was established. Abby began marketing the software program in 2010 and earned revenues of P4,320,000 in 2010. Abby estimates that the total revenues over the 4-year life of the product will be P21,600,000. At the end of 2010, Abby was offered…During the current year, Pitt Company incurred costs to develop and produce a routine, low-risk computer software product. Completion of detailed program design Costs incurred for coding and testing to establish technological feasibility Other coding costs after establishment of technological feasibility Other testing costs after establishment of technological feasibility Costs of producing product masters for training materials Duplication of computer software and training materials from product masters (1,000 units) Packaging product (500 units) 1,300,000 1,000,000 2,400,000 1,500,000 2,500,000 1. In the year-end statement of financial position, what amount should be reported in inventory? a. 2,500,000 b. 3,400,000 c. 4,000,000 d. 4,900,000 2. What total amount .of the costs incurred should be expensed immediately? a. 8,200,000 b. 2,300,000 c. 6,700,000 d. 4,400,000 3. In the year-end statement of financial position, what amount should be capitalized as software cost? a. 5,400,000 b.…
- The Elegant Software Company recently completed the development and testing of a new software program thatprovides the ability to transfer data from among a variety of operating systems. The company believes this productwill be quite successful and capitalized all of the costs of designing, developing, coding, and testing the software.These costs will be amortized over the expected useful life of the software on a straight-line basis.Required:1. Was Elegant correct in its treatment of the software development costs? Why?2. Explain the appropriate method for determining the amount of periodic amortization for any capitalized software development costsManagement of Ellen Software Services (ESS) has recently implemented a TQM program to eliminate a serous level of "program bugs" that plagued its recent product releases. The following activities and their costs were taken from ESS's records. The data are for 2019 (the year prior to the TQM program) and 2021 (the year after the start of the TQM program). 2019 2021 Design documentation standards development 100,000 Documentation of customer training process 20,000 Documentation of changes to software 5,000 20,000 Customer training 100,000 130,000 Software testing - Customer site 130,000 80,000 Software – testing – pre-release 50,000 140,000 Telephone "on-line" customer problem support 90,000 60,000 Software corrections and redesign 50,000 20,000 Field "trouble shooting" for customer support 140,000 80,000 Costs of Contract cancellations 180,000 30,000 Revenues lost due to delivery date delays 120,000 Training for systems designers/programmers 100,000 250,000 Training for sales staff…RUE BENNETT Company develops software for small businesses and household computers. The majority of the company's computer programmers are working on developing software that will perform relatively specialized functions in a user-friendly manner. Before the working model is released to production for the preparation of masters and additional testing, it undergoes extensive testing. As a result of this meticulous planning, various computer software packages have been developed that have proven to be very successful in the industry. RUE BENNETT Company incurred the following costs during 2020: Cost to reproduce and prepare software for sale 200,002 Amortization of capitalized software development costs from current and prior years 94,321 Expenses related to projects after technological feasibility has been established but before software is available for commercial production 151,323 Salaries and wages of programmers doing research 910,000 Expenses related…
- AMT, Inc., is considering the purchase of a digital camera for maintenance of design specifications by feeding digital pictures directly into an engineering workstation where computer-aided design files can be superimposed over the digital pictures. Differences between the two images can be noted, and corrections, as appropriate, can then be made by design engineers a. You have been asked by management to determine the PW of the EVA of this equipment, assuming the following estimates: capital investment = $362,000; market value at end of year six = $115,000; annual revenues = $111,000; annual expenses = $10,000; equipment life = 6 years; effective income tax rate = 27%; and after-tax MARR = 10% per year. MACRS depreciation will be used with a five-year recovery period. b. Compute the PW of the equipment's ATCFS. Click the icon to view the GDS Recovery Rates (r,) for the 5-year property class. E Click the icon to view the interest and annuity table for discrete compounding when the MARR…XYZ Company made expenditures for the following: Costs in activities aimed at obtaining new knowledge P 10,000 Cost of developing and producing a prototype model 3,000 Cost of testing the prototype model for safety and environmental friendliness 30,000 Cost of revising designs for flaws in the prototype model 10,000 Salaries of employees, consultants and technicians involved in R and D 20,000 Marketing research to study consumer tastes 5,000 Advertising to establish recognition of the newly developed product 30,000 Cost of conference for the introduction of the newly developed product including fee of a model hired as endorser How much is recognized as research and development expense? _____________CyberBest started to develop an anti-malware application on August 1, 20X1. It reached technological feasibility on March 1, 20X2, and the application was released on April 30, 20X2. Below are costs to develop the application. August 1 through December 31, 20X1 $5,000,000 January 1 through February 28, 20X2 1,600,000 March 1 through April 30, 20X2 1,800,000 Determine the amount of asset and the amount of R&D expenses relating to the development of this anti-malware application. $1,800,000 asset, and $6,600,000 R&D expenses $5,000,000 asset, and $3,400,000 R&D expenses $6,600,000 asset, and $1,800,000 R&D expenses $3,400,000 asset, and $5,000,000 R&D expenses
- Chilton Peripherals manufactures printers, scanners, and other computer peripheral equipment. In the past, thecompany purchased equipment used in manufacturing from an outside vendor. In March 2018, Chilton decidedto design and build equipment to replace some obsolete equipment. A section of the manufacturing plant was setaside to develop and produce the equipment. Additional personnel were hired for the project. The equipment wascompleted and ready for use in September.Required:1. In general, what costs should be capitalized for a self-constructed asset?2. Discuss two alternatives for the inclusion of overhead costs in the cost of the equipment constructed by Chilton. Which alternative is generally accepted for financial reporting purposes?3. Under what circumstance(s) would interest be included in the cost of the equipment?Johnson Limited is contemplating the installation of a new system that would allow for automated handling of customer inquiries about their order status, account balances, etc. Currently all such inquiries are handled manually by customer service representatives. The software for the new system would cost $214,000. An additional $169,000 would be required for one-time installation costs. Management estimates that the new system would result in costs of $10,300 per year related to addressing software issues and other technological problems that may arise. However, the new system is expected to reduce labour costs by $65,000 per year. Management estimates that the system would be used for five years. Severance costs related to the employees that would be laid off after implementing the new system would be $22,600. Johnson Limited requires a return of at least 15% on investments of this type. Required: Ignore income taxes. 1. Compute the net annual cost savings promised by the new system.…Bianca Company incurred the following costs during 2021:- Testing in search for process alternative = 230,000- Adaptation of an existing capability to a particular requirement or customer's need = 140,000- Design, construction, and testing of pre-production prototypes and models = 120,000- Routine design of tools, jigs, molds, and dies = 125,000 Required:How much is the research and development expense in 2021?