Chapter 10, Problem 10.31E

Software development costs

• LO10–8

Early in 2018, the Excalibur Company began developing a new software package to be marketed. The project was completed in December 2018 at a cost of $6 million. Of this amount, $4 million was spent before technological feasibility was established. Excalibur expects a useful life of five years for the new product with total revenues of $10 million. During 2019, revenue of $3 million was recognized.

Required:

1. 1. Prepare a journal entry to record the 2018 development costs.
2. 2. Calculate the required amortization for 2019.
3. 3. At what amount should the computer software costs be reported in the December 31, 2019, balance sheet?