Question

Flounder Ltd. decided that it needed to update its computer programs for its supplier relationships. It purchased an off-the-shelf program and modified it internally to link it to Flounder’ other programs. The following costs may be relevant to the accounting for the new software:

Original cost of old software		$10,300
Accumulated amortization of old software		8,240
Purchase price of new software		7,800
Training costs		4,000
General and administrative costs		2,490
Direct cost of in-house programmer’s time spent on modifying software		1,540

Prepare journal entry to record the software replacement. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts.)

Answer 1

SOLUTION- Journal Entry

Account Titles and Explanation	Debit	Credit
Intangible Assets -Software(7800+1540)	9340
Amortization Expense (10,300-8,240)	2,060
Accumulated Amortization - Software	8,240
Training Costs	4000
General and administrative expenses	2490
Intangible Assets - Software (Old)		10,300
Cash		15830

NOTE- all the cost which incurred to make the asset ready for production(present condition) is added to the actual cost of the asset. Thats why we added in-house programmer fees in cost.

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