aren Austin Corporation has capitalized software costs of $858,500, and sales of

Question

aren Austin Corporation has capitalized software costs of $858,500, and sales of this product the first year totaled $423,660. Karen Austin anticipates earning $988,540 in additional future revenues from this product, which is estimated to have an economic life of 5 years. Compute the amount of software cost amortization for the first year.  

(a) Compute the amount of software cost amortization for the first year using the percent of revenue approach. $ aren Austin Corporation has capitalized software costs of $858,500, and sales of this product the first year totaled $423,660. Karen Austin anticipates earning $988,540 in additional future revenues from this product, which is estimated to have an economic life of 5 years. Compute the amount of software cost amortization for the first year.

Explanation / Answer

Hi,

Please find the answer as follows:

Part A:

Revenue Approach

Total Estimated Revenue = 423660 + 988540 = 1412200

Software Amortization Cost = 423660/1412200*858500 = 257550

Part B:

Straight Line Method = 858500/5 = 171700

Thanks.

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