Exercise 10-31 Software development costs [LO10-8]

Early in 2018, the Excalibur Company began developing a new software package to be marketed. The project was completed in December 2018 at a cost of $11,000,000. Of this amount, $9,000,000 was spent before technological feasibility was established. Excalibur expects a useful life of five years for the new product with total revenues of $15,000,000. During 2019, revenue of $6,000,000 was recognized. Required: 1. Prepare a journal entry to record the 2018 development costs. 2. Calculate the required amortization for 2019. 3. At what amount should the computer software costs be reported in the December 31, 2019, balance sheet?

Prepare a journal entry to record the 2018 development costs. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Journal entry worksheet

Record the 2018 development costs.

Note: Enter debits before credits.

Event	General Journal	Debit	Credit
1

Calculate the required amortization for 2019.

	Required amortization
Percentage-of-revenue method
Straight-line method

At what amount should the computer software costs be reported in the December 31, 2019, balance sheet?

Balance sheet
Software development costs
Less: Amortization to date
Net