During 2020, Saskatchewan Enterprises Ltd., a private entity, incurred $4.7

During 2020, Saskatchewan Enterprises Ltd., a private entity, incurred $4.7 million in costs to develop a new software product called Dover. Of this amount, $1.8 million was spent before the company determined that the product was technologically and financially feasible. Dover was completed by December 31, 2020, and will be marketed to third parties. Saskatchewan expects a useful life of eight years for this product, with total revenues of $12 million. During 2021, Saskatchewan realized revenues of $2.7 million from sales of Dover.


Instructions

a. Assuming Saskatchewan reports under ASPE, prepare the journal entries that are required in 2020 to record the above.

b. Prepare the entry to record amortization at December 31, 2021, assuming a straight-line method of amortization.

c. At what amount should the software costs be reported in the December 31, 2021, statement of financial position?

d. Could the net realizable value of this asset at December 31, 2021, affect your answer? Explain howlimited-life assets are tested for impairment.

e. How would your response to part (d) change if Saskatchewan Enterprises Ltd. were a public company?

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