Cebrex Software began a new development project in 2017. The project reached technological feasibility on June 30, 2018, and was available for release to customers at the beginning of 2019. Development costs incurred prior to June 30, 2018, were $3,200,000 and costs incurred from June 30 to the product release date were $1,400,000. The economic life of the software is estimated at four years. For what amount will software be capitalized in 2018?
A) $0.
B) $5,600,000.
C) $1,400,000.
D) $3,200,000.

Question

Quizplus · Accepted Answer

According to accounting standards, costs incurred after a project reaches technological feasibility but before it is available for general release to customers can be capitalized. In this case, the project reached technological feasibility on June 30, 2018, so the $1,400,000 incurred from that date until the release date in early 2019 should be capitalized. Costs incurred before reaching technological feasibility ($3,200,000) are expensed as they are incurred.

Cebrex Software Began a New Development Project in 2017