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In 2016, eGames spent $8,000,000 developing new software. Of this amount, $5,300,000 was spent before July 2016when technological feasibility was established. The product was marketed
In 2016, eGames spent $8,000,000 developing new software. Of this amount, $5,300,000 was spent before July 2016when technological feasibility was established. The product was marketed to consumers beginning in September 2016. eGames estimates total revenue of $20,000,000 to be earned during the softwares 3-year life (calculated from the September 1 product release date). During 2016, revenue of $10,000,000 was recognized.
Required:
1. | Prepare the 2016 journal entries to record the development costs. |
2. | Compute the amount of amortization to be recognized in 2016 and prepare the appropriate journal entry, if any. |
3. | Next Level What is the justification for treating software development costs differently from R&D costs? |
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