Question

3) Nerdware Corp. began a new software development project in 2017. The project reached technological feasibility on June 30, 2018, and was available for release to customers at the beginning of 2019. Development costs incurred prior to June 30, 2018, were $5,000,000 and costs incurred from June 30 to the product release date were $1,700,000. The 2019 revenues from the sale of the new software were $5,000,000, and the company anticipates additional revenues of $6,500,000. The economic life of the software is estimated at four years. Amortization of the software development costs for the year 2019 would be:

Answer 1

506.09

Step-by-step explanation:

i think this is right

Answer 2

$739,160.00

Step-by-step explanation:

The amount of amortization recorded in 2019 would reflect the sales revenue made in 2019.

The appropriate way to calculate the amortization charge each year is to divide the year's revenue by total revenue expected from the software over the four-year period,then multiply by the cost incurred on the software from the day the project reached technological feasibility till the date of product release as shown below

% of cost amortized in 2019=$5,000,000/($5,000,000+$6,500,000)=43.48%

Amortization in 2019=43.48%*$1,700,000=$739,160.00

The cost incurred to the date of technological feasibility should be expensed to profit or loss account