Question

In March 2024, Price Company began developing a new software system to be used internally for managing its inventory. The software integrates customer orders with inventory on hand to automatically place orders for additional inventory when needed. The software then automatically records inventory as the shipment is received and read by scanners. The software development was completed in October 2024 at a cost of 150,000. Of this amount,25,000 was spent before the application development stage was established. Price expects to use the software for at least five years. What was the total cost of the software development?

1) $150,000
2) $125,000
3) $25,000
4) Cannot be determined

Answer 1

The total cost of developing the software system by Price Company is $150,000. This encompasses all the costs incurred throughout the development period, including the pre-application development stage.

Step-by-step explanation:

The total cost of the software development for Price Company is $150,000. This includes the initial $25,000 spent before the application development stage. According to accounting principles for internal-use software, all costs incurred during the software development stage should be capitalized and amortized over its useful life. Therefore, the entire amount of $150,000 represents the capitalizable cost of the software development project, which will be used by Price Company for managing its inventory.