Question

In February 2021, Culverson Company began developing a new software package to be sold to customers. The software allows people to enter health information and daily eating and exercise habits to track their health status. The project was completed in November 2021 at a cost of $1,500,000. Of this amount, $540,000 was spent before technological feasibility was established. Culverson expects a useful life of two years for the new product and total revenues of $1,740,000. Determine the amount that Culverson should capitalize as software development costs in 2021.

Answer 1

Answer:

$960,000

Explanation:

The computation of the software development capitalized is shown below:

= Project completion cost - Amount spent before the technological feasibility  established

= $1,500,000 - $540,000

= $960,000

By deducting the amount spent before the technological feasibility established from the project completion cost we can get the capitalized amount with respect to the software development