Question: During Year 1, PC Software Inc. developed a new personal computer database management software package. Total expenditures on the project were $7,200,000, of which 40%

During Year 1, PC Software Inc. developed a new personal computer database management software package. Total expenditures on the project were $7,200,000, of which 40% occurred after the technological feasibility of the product had been established. The product was completed and offered for sale on January 1 of Year 2. During Year 2, revenues from sales of the product totaled $11,520,000. The product is expected to be successfully marketable for five years, and the total revenues over the life of the product are estimated to be $48,000,000.

Required

a. Prepare the journal entry to account for the development of this product in Year 1.

b. Prepare the journal entry to record the amortization of capitalized computer software development costs in Year 2.

c. What disclosures are required in Year 2 financial statements regarding computer software costs?

d. Suppose this product were developed for internal use. How would the answers to (a), (b), and (c) change?

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