Delicious Dinners (DD) is a business entity which offers online cooking classes. Customers pay an annual fee to participate in weekly cooking classes. In early 2021 DD made the decision that their existing customer relationship management database could no longer support their business. DD developed a design and plan to create their own CRM software system. During the application and development stage of the new CRM system DD correctly followed GAAP and capitalized $2,000,000. DD completed the project in July 2021. The CRM system worked very well for DD after the completion of the project.

In January 2022 DD the CEO of DD proposed that the CRM system the company developed also could be marketed to other online companies. The company has developed a plan to sell annual licenses to other companies for the CRM system for $24,000 per year. In February 2022 DD sold 4 annual licenses for the CRM system that the company developed to other companies. The 4 businesses all paid DD $24,000 during the month of February for the annual license to the CRM system.

The CFO of DD is unsure of where/how in the financial statements the $24,000 proceeds from the sale of the license of the internally developed software should be presented.

Accounting Issue: How/where in the financial statements should DD present the $24,000 proceeds from the sale of the licenses of the CRM system?

 

Answer rating: 100% (QA)

License revenue nonoperating income As the providing of licens... View the full answer