Question

On January 1, Year 1, a company with a calendar year end began developing a software program that it intends to market and sell to its customers. The software coding was completed on March 31, Year 1, at a cost of $200,000, and the software testing was completed on June 30, Year 1, at a cost of $100,000. The company achieved technological feasibility on July 31, Year 1, at which time the company began producing product masters at a cost of $125,000. What amount should the company report for the total research and development expense for the year ended December 31, Year 1?

Answer 1

Answer:

$300,000

Explanation:

On January 1, Year 1, a company with a calendar year end began developing a software program that it intends to market and sell to its customers.

The software coding was completed on March 31, Year 1, at a cost of $200,000, and the software testing was completed on June 30, Year 1, at a cost of $100,000.

The company achieved technological feasibility on July 31, Year 1, at which time the company began producing product masters at a cost of $125,000.

Therefore the amount that the company should report for the total research and development expense for the year ended December 31, Year 1 is the cost of software coding ($200,000) and software testing ($100,000) which are the costs up to the point, before the company started producing.