SS Inc. begins to develop a computer software program that can be sold to the pu
ID: 2539084 • Letter: S
Question
SS Inc. begins to develop a computer software program that can be sold to the public. During the current year, costs of $270,000 are incurred to arrive at the point of technological feasibility (a working model is available). Another $130,000 is then spent to turn that working model into a product that can be sold. Which of the following statements is true?
A)$400,000 should be recorded as an expense in this year.
B)$400,000 should be recorded as an asset to be reported on the company's balance sheet.
C)$270,000 should be recorded as an asset and the $130,000 should be recorded as an expense.
D)$270,000 should be recorded as an expense and the $130,000 should be recorded as an asset.
Explanation / Answer
Answer :C)$270,000 should be recorded as an asset and the $130,000 should be recorded as an expense.
Software for sale lease or marketing is capitalized after technological feasibility is attained .Determining whether software is feasible typically involves the completion of a working model that is ready for customer testing.
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