Prep Inc. follows IFRS and has a December 31st year end. On July 5, 20x9, they purchased
Question:
Prep Inc. follows IFRS and has a December 31st year end. On July 5, 20x9, they purchased the rights for web-hosting software from a software developer at a cost of $26,000. The software was functional, but Prep Inc. had to implement some changes in order for it to be compatible with its services and business model. The CFO has tracked the costs of adapting the software and has reported the following:
Payment to seller for installation & testing of software $ 5,000
Salaries & Benefits of IT employees (additional programming of the software) 8,500
Salaries & Benefits of Customer Service employees (training to use new software) 4,200
Total expenditures on installation & testing of new software 17,700
At year end Prep Inc. is showing an intangible asset equal to $43,700.
Please use IAS 38 to explain which costs were correctly capitalized and which were not
Intermediate Accounting Volume 2
ISBN: 9781119740445
13th Canadian Edition
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Irene M. Wiecek, Bruce J. McConomy