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German Company, PAS software is developing an ERP (Enterprise Resource Planning) system for sale to mid-size...

  1. German Company, PAS software is developing an ERP (Enterprise Resource Planning) system for sale to mid-size companies around the world. Software development started during 2018, during which time $45 million was incurred. During 2019, and additional $60 million was incurred, with $10 million of this incurred after technological feasibility of the new software had been established. Record the journal entry for the 2019 software development costs.

Refer back to question above. Assume this product was released to customers in early 2020, and is assumed to have a 10-year useful life. Revenues from sale of the ERP system in 2020 were $30 million, and total expected revenues over the life of the product were $200 million. Record the journal entry for amortization of the capitalized software in 2020.

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Answer #1

Part A) JOURNAL ENTRY for recording Software Development Costs in 2019

Particulars Debit

Credit

i)Software Development Expenses

Cash

( Being software development costs expensed before technology feasibility is assessed)

 60 million 60 million

II) Profit & Loss

Software Development Expenses

( Being Expenses charged through P&L)

 60 million 60 million

iii) Software Development

Cash

( Being software development costs capitalized after technology feasibility is assessed

 10 million 10 million

PART B) JOURNAL ENTRY in 2020

Particulars Debit Credit

Amotization

Software & Development

Being software amortized on SLM basis considering useful life of 10 yrs

 1 Million 1 Million

Profit & Loss

Amortization Expenses

( Being Amortization expenses charged from P&L)

 1 Million 1 Million
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