ExpertHard1 markMultiple Choice
CPA · Question 21 · Area 2: Select Accounts
Tech Co. incurred the following costs for developing software for internal use:<br/>- Preliminary project stage: $50,000<br/>- Application development stage (coding/testing): $200,000<br/>- Training employees: $30,000<br/>- Data conversion costs: $20,000<br/><br/>What amount should be capitalized?
Tech Co. incurred the following costs for developing software for internal use:<br/>- Preliminary project stage: $50,000<br/>- Application development stage (coding/testing): $200,000<br/>- Training employees: $30,000<br/>- Data conversion costs: $20,000<br/><br/>What amount should be capitalized?
Answer options:
A.
$250,000
B.
$200,000
C.
$230,000
D.
$300,000
How to approach this question
Timeline: Preliminary (Expense) -> Application Development (Capitalize) -> Post-Implementation (Expense). Training is always expensed.
Full Answer
B.$200,000✓ Correct
B
For internal-use software, costs incurred during the preliminary project stage are expensed. Costs during the application development stage are capitalized. Training and data conversion are post-implementation activities and are expensed.
Common mistakes
Capitalizing training costs; capitalizing preliminary research.
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