Jensen Inc. has created a new website that it believes will help families share photos more easily,

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Question:

Jensen Inc. has created a new website that it believes will help families share photos more easily, create calendars and photo books, and share and edit family videos. The company believes that this new website will go viral and has established a new division called “Photoshare” for this effort.

Jensen’s accounting team is preparing the first financial statements for Photoshare for the fiscal year ended March 31, 2022, as required by their investors. During the year, Jensen incurred the following costs to develop this website:

$1 million to create the web platform capable of storing photos and allowing multiple users to view and edit photos
$100,000 for website design, including the photo that appears on the homepage and the placement of each tab and link
$50,000 to content writers, who wrote the “Welcome screen” message, plus the instructions for users on how to use the site

The accounting team has done some preliminary research and concluded that this website is “internal-use” software and will not be sold or leased to outside parties.

Requirements:

l. You are the Controller for Jensen Inc. and wish to research and write an accounting issues memorandum (addressed to “the Files”) that explains the proper accounting for the costs of developing the website. Use the ASC and research whether Jensen should treat each cost as an asset or expense on the Division’s financial statements. Provide the appropriate references to support your responses. Use the format in the text and in our recent homework assignments.

2. Support your findings with at least 1 citation from nonauthoritative guidance from a CPA firm as discussed in Chapter 5. Follow the proper way to reference the citation as presented in the chapter.

3. Locate the ASU or pre-codification source (i.e., the FASB Statement, EITF Issue, etc.) that gave rise to the Codification guidance you located. Include that reference in your memo (for historical purposes).