Asked by Masaki Sakurai on May 29, 2024
Verified
Production costs related to computer software that is to be sold, leased, or otherwise marketed should be accounted for in which of the following ways?
A) All software production costs should be recorded as R&D expense.
B) All software production costs should be capitalized.
C) All software production costs should be recorded as R&D expense until technological feasibility is established.
D) All software production costs should be recorded in R&D expense until the product is available for general release to customers.
Software Production Costs
Expenses associated with the development, design, and implementation of software, which may be capitalized or expensed depending on the stage of development.
Technological Feasibility
The point at which it can be demonstrated that a new technology will function as intended.
Marketed
The process of promoting or selling goods and services, including market research and advertising.
- Acquire knowledge on the GAAP rules for expense recognition concerning research and development, patents, and other intangible resources.
- Familiarize yourself with the standards for classifying software production costs and legal expenses for intangible assets protection as capital expenditures versus expenses.
Verified Answer
TT
Tasfia TasnimMay 31, 2024
Final Answer :
C
Explanation :
According to generally accepted accounting principles (GAAP), production costs related to computer software should be capitalized once technological feasibility is established. Before this point, all costs should be recorded as research and development (R&D) expenses. Therefore, option C is the correct choice as it acknowledges the need to record software production costs as R&D expenses until this feasibility is established.
Learning Objectives
- Acquire knowledge on the GAAP rules for expense recognition concerning research and development, patents, and other intangible resources.
- Familiarize yourself with the standards for classifying software production costs and legal expenses for intangible assets protection as capital expenditures versus expenses.