Tecktroniks Company reported in its annual report software refinement expenses o

Question

Tecktroniks Company reported in its annual report software refinement expenses of $20 million, $12 million, and $15 million for fiscal years 2005, 2006, and 2007, respectively. At the end of fiscal 2007, it had total assets of $140 million. Net income was $20 million for fiscal 2007, and it had a marginal tax rate of 35%. If software refinement had been capitalized each year and amortized over a three-year period beginning in the year the cost was incurred, total assets at the end of fiscal 2007 would have been:

Explanation / Answer

Software refine expense

                       2005                     2006                             2007

cost              20m                       12m                              15m

amortised   20m                         8m                                5m

balance      0m                           4m                               10m

hence total assets at tehend of fiscal year = $0m + $4m + $10m   + 140m   = $154m

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