Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Gamers Technology ( GT ) is a private company with a December 3 1 st fiscal year end. GT is an online magazine which it
Gamers Technology GT is a private company with a December st fiscal year end. GT is an online magazine which it sells on a month subscription basis. To meet the daily demands of its readers, GT also produces a daily blog that includes contributions from many authors who provide commentary on games, etc. GTs management has realized that a customer relationship management CRM database is necessary to help the business increase market share.
In a planning meeting, key employees from different company departments determined that the new system must be integrated with the company's accounting system while maintaining its independent functionality. Since this type of design would require a sophistication unique to GT GT decided it would be appropriate to build a customized system. The company, chose to retain the services of Cailor Technology Consulting, a firm specializing in the development of fully functional systems integration. Per the agreement, professionals from Cailors firm conducted the entire project without requiring any labor resources from GT
On May th Cailor began working on the project. Cailor professionals completed the development of the new system on July th Cailor converted GTs old system data to the new system during the week ending July th Cailor spent the next week, iefrom July July training GTs company employees on matters regarding the use of the system. After July Cailor's involvement in the project was complete. All expenditures for this project were paid by GT on July
In determining the financial reporting of the new CRM system, GTs controller, Sara Larson, summarized the expenditures as follows:
Description Amounts
Costs incurred by GT prior to May. for system planning of the new CRM system $
Cailors fees to GT for development of the CRM system $
Conversion of old GT data to new CRM system $
Costs incurred from July July for training of GT employees $
These expenditures were recorded by GT as follows:
CRM Computer System
Cash
CRM Computer System is a long term asset
Accounting Issue: Did Gamers Technology should recognize the expenditures related to the CRM system? If not, how should these expenditures be recognized?
a Codification Reference:
b Your interpretation of the guidance:
c Prepare the journal entry to correct how GT initially recognized the expenditures so that the expenditures are correctly recorded.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started