ExpertMedium1 markMultiple Choice
CPA · Question 29 · Area II: Technical Accounting
A company incurs the following costs related to developing software for internal use:<br/>- Preliminary project stage (evaluating alternatives): $50,000<br/>- Application development stage (coding, testing): $200,000<br/>- Data conversion costs: $30,000<br/>- Training employees on new software: $20,000<br/>- Post-implementation maintenance: $15,000<br/><br/>What amount should be capitalized as software?
A company incurs the following costs related to developing software for internal use:<br/>- Preliminary project stage (evaluating alternatives): $50,000<br/>- Application development stage (coding, testing): $200,000<br/>- Data conversion costs: $30,000<br/>- Training employees on new software: $20,000<br/>- Post-implementation maintenance: $15,000<br/><br/>What amount should be capitalized as software?
Answer options:
A.
$250,000
B.
$230,000
C.
$200,000
D.
$315,000
How to approach this question
Recall ASC 350-40 rules. Capitalize: Application Development (Design, Coding, Testing, Installation). Expense: Preliminary Project, Training, Data Conversion, Maintenance.
Full Answer
C.$200,000✓ Correct
C
Under ASC 350-40, only costs incurred during the Application Development Stage (coding, testing, installation) are capitalized ($200,000). Preliminary costs ($50k), Training ($20k), Data Conversion ($30k), and Maintenance ($15k) are expensed as incurred.
Common mistakes
Capitalizing training or preliminary costs.
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