Gamers Technology $($GT$)$ is a private company with a December $31$st fiscal year end. GT is an online magazine which it sells on a $12-$month subscription basis. To meet the daily demands of its readers, GT also produces a daily blog that includes contributions from many authors who provide commentary on games, etc. GT$$s management has realized that a customer relationship management $($CRM$)$ database is necessary to help the business increase market share.

In a planning meeting, key employees from different company departments determined that the new system must be integrated with the company's accounting system while maintaining its independent functionality. Since this type of design would require a sophistication unique to GT GT decided it would be appropriate to build a customized system. The company, chose to retain the services of Cailor Technology Consulting, a firm specializing in the development of fully functional systems integration. Per the agreement, professionals from Cailor$$s firm conducted the entire project without requiring any labor resources from GT$.$

On May $4$th$,2023,$ Cailor began working on the project. Cailor professionals completed the development of the new system on July $8$th$,2023.$ Cailor converted GT$$s old system data to the new system during the week ending July $15$th$.$ Cailor spent the next week, i$.$e$.,($from July $16-$ July $22)$ training GT$$s company employees on matters regarding the use of the system. After July $22,2023$ Cailor's involvement in the project was complete. All expenditures for this project were paid by GT on July $30,2023.$

In determining the financial reporting of the new CRM system, GT$$s controller, Sara Larson, summarized the expenditures as follows:

Description Amounts

Costs incurred by GT prior to May. $4,2023$ for system planning of the new CRM system $$60,000$

Cailor$$s fees to GT for development of the CRM system $$2,250,000$

Conversion of old GT data to new CRM system $$200,000$

Costs incurred from July $16-$ July $22,2023$ for training of GT employees $$75,000$

$$

These expenditures were recorded by GT as follows:

$7/30/23$ CRM Computer System$*2,585,000$

Cash $2,585,000$

$*$CRM Computer System is a long term asset

Accounting Issue: Did Gamers Technology should recognize the expenditures related to the CRM system? If not, how should these expenditures be recognized?

a$.$ Codification Reference:

b$.$ Your interpretation of the guidance:

c$.$ Prepare the journal entry to correct how GT initially recognized the expenditures so that the expenditures are correctly recorded.

Answer rating: 100% (QA)

Gamers Technologys CRM system 1 Background Information Gamers Technology GT is a private company with a December 31st fiscal year end GT is an online ... View the full answer