Axcel Software Began a New Development Project in 2008

question 93

Multiple Choice

Axcel Software began a new development project in 2008. The project reached technological feasibility on June 30, 2009 and was available for release to customers at the beginning of 2010. Development costs incurred prior to June 30, 2009 were $3,200,000 and costs incurred from June 30 to the product release date were $1,400,000. 2010 revenues from the sale of the new software were $4,000,000 and the company anticipates additional revenues of $6,000,000. The economic life of the software is estimated at four years. 2010 amortization of the software development costs would be:

• A)$ 0.
• B)$ 350,000.
• C)$1,840,000.
• D)$ 560,000.Percentage of-revenue method: $4,000,000 ($4,000,000 + 6,000,000) = 40 % Straight-line method: ¼ or 25%
• Amortization = $1,400,000 40% = $560,000

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Definitions:

Mafic Minerals

Dark-colored minerals that are rich in magnesium and iron, commonly found in basalt and gabbro.

Igneous Rocks

Rocks formed from the cooling and solidification of molten magma or lava.

Volcanic Glass

A shiny and smooth rock formed when molten lava cools rapidly without crystallizing.

Cooling

The process of losing heat, leading to a decrease in temperature; can refer to geologic formations solidifying from molten states.