Production costs related to computer software that is to be sold, leased, or otherwise marketed should be accounted for in which of the following ways?
A)All software production costs should be recorded as R&D expense.
B)All software production costs should be capitalized.
C)All software production costs should be recorded as R&D expense until technological feasibility is established.
D)All software production costs should be recorded in R&D expense until the product is available for general release to customers.

Question

Quizplus · Accepted Answer

According to generally accepted accounting principles (GAAP), production costs related to computer software should be capitalized once technological feasibility is established. Before this point, all costs should be recorded as research and development (R&D) expenses. Therefore, option C is the correct choice as it acknowledges the need to record software production costs as R&D expenses until this feasibility is established.

Production Costs Related to Computer Software That Is to Be