During 2017, BRAHAM Enterprises Ltd., a private entity, incurred $4.7 million in costs to develop...
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During 2017, BRAHAM Enterprises Ltd., a private entity, incurred $4.7 million in costs to develop a new software product called Clover. Of this amount, $1.5 million was spent before establishing that the product was technologically and financially feasible. Clover was completed by December 31, 2017, and will be marketed to third parties. BRAHAM expects a useful life of 6 years for this product, with total revenues of $14 million. During 2018, BRAHAM realized revenues of $2.9 million from sales of Clover.
Assuming BRAHAM reports under ASPE, the journal entries that are required in 2017 to record the above are as follows:
Prepare the entry to record amortizationatDecember 31,2018using thestraight linemethod.
Account Titles and Explanation Credit Research and Development Expense 1500000 Cash 1500000 (To record costs spent before establishing the product) Software 3200000 Cash 3200000 (To record costs to develop the new software product)
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