During 2014, Extel Computing Inc. spent $8,600,000 developing its new software package. Of this amount, $5,000,000 was

Question:

During 2014, Extel Computing Inc. spent $8,600,000 developing its new software package. Of this amount, $5,000,000 was spent before technological feasibility was established for the product, which is to be marketed to third parties. The package was completed at December 31, 2014. Extel expects a useful life of 4 years for this product with total revenues of $35,000,000. During the first year (2015), Extel realizes revenues of $3,500,000.

Instructions
(a) Prepare journal entries required in 2014 for the foregoing facts.
(b) Prepare the entry to record amortization at December 31, 2015.
(c) At what amount should the computer software costs be reported in the December 31, 2015, balance sheet? Could the net realizable value of this asset affect your answer?
(d) What disclosures are required in the December 31, 2015, for the computer software costs?
(e) How would your answers for (a), (b), and (c) be different if the computer software was developed for internal use?

Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...