Question

On September 30, 2021, Athens Software began developing a software program to shield personal computers from malware and spyware. Technological feasibility was established on February 28, 2022, and the program was available for release on April 30, 2022. Development costs were incurred as follows: September 30 through December 31, 2021 $ 2,310,000 January 1 through February 28, 2022 910,000 March 1 through April 30, 2022 510,000 Athens expects a useful life of five years for the software and total revenues of $7,000,000 during that time. During 2022, revenue of $1,050,000 was recognized. Required: Prepare a journal entry in each year to record development costs for 2021 and 2022.

Answer 1

Answer and Explanation:

The journal entries are shown below:

For 2021

Research and development expense $2,310,000

To Cash $2,310,000

(Being expenses incurred on R&D is recorded)

Here expenses are debited as it increased the expense and credited the cash as it decreased the assets

For 2022

Research and development expense $910,000

Software development expense $510,000

To Cash $1,420,000

(Being expenses incurred is recorded)

Here expenses are debited as it increased the expense and credited the cash as it decreased the assets