A is corrent. The requirement is to determine the amount of expense on the income statement for the first full year. According to ASC Subtopic 350-40, costs of internally developed software after the development stage may be capitalized and amortized over the asset’s economic life. The software should be recorded at cost and amortized over its useful life of three years. Therefore, the amount of expense for the first full year would be $10,000,000 ÷ 3 years = $3,333,333. Therefore, this answer is correct.
B is incorrect. According to ASC Subtopic 350-40, costs of internally developed software after the development stage may be capitalized and amortized over the asset’s economic life. The software should be recorded at cost and amortized over its useful life of three years. Therefore, the amount of expense for the first full year would be $10,000,000 ÷ 3 years = $3,333,333.
B is incorrect. According to ASC Subtopic 350-40, costs of internally developed software after the development stage may be capitalized and amortized over the asset’s economic life. The software should be recorded at cost and amortized over its useful life of three years. Therefore, the amount of expense for the first full year would be $10,000,000 ÷ 3 years = $3,333,333.
D is incorrect. According to ASC Subtopic 350-40, costs of internally developed software after the development stage may be capitalized and amortized over the asset’s economic life. The software should be recorded at cost and amortized over its useful life of three years. Therefore, the amount of expense for the first full year would be $10,000,000 ÷ 3 years = $3,333,333.
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