B is corrent. Simms may capitalize development costs if the following criteria are met: (1) technological feasibility of completing the asset for use or sale has been achieved; (2) the entity intends to complete and use or sell the asset; (3) the entity has the ability to use or sell the asset; (4) the entity understands how the asset will generate probable future economic benefits; (5) technical, financial, and other resources are available to complete development of the asset; (6) the entity has the ability to reliably measure the expenditures. Evidence in the problem indicates that the tablet is technologically and economically feasible (criteria 1 and 3), Simms has the ability to sell the product (criteria 2, 3, 5 (implied), and Simms anticipates a profit on tablet sales (criteria 4 and 6). Because technological and economic feasibility were met in quarter two, all costs thereafter, can be capitalized ($75,000). The $200.000 and $25,000 should be expensed as incurred because all criteria had not been met at that point.
A is incorrect. Simms may capitalize development costs if the following criteria are met: (1) technological feasibility of completing the asset for use or sale has been achieved; (2) the entity intends to complete and use or sell the asset; (3) the entity has the ability to use or sell the asset; (4) the entity understands how the asset will generate probable future economic benefits; (5) technical, financial, and other resources are available to complete development of the asset; (6) the entity has the ability to reliably measure the expenditures. Evidence in the problem indicates that the tablet is technologically and economically feasible (criteria 1 and 3), Simms has the ability to sell the product (criteria 2, 3, 5 (implied), and Simms anticipates a profit on tablet sales (criteria 4 and 6). Because technological and economic feasibility were met in quarter two, all costs thereafter, can be capitalized ($75,000). The $200.000 and $25,000 should be expensed as incurred because all criteria had not been met at that point.
C is incorrect because development costs may be capitalized if certain criteria are met. Simms may capitalize development costs if the following criteria are met: (1) technological feasibility of completing the asset for use or sale has been achieved; (2) the entity intends to complete and use or sell the asset; (3) the entity has the ability to use or sell the asset; (4) the entity understands how the asset will generate probable future economic benefits; (5) technical, financial, and other resources are available to complete development of the asset; (6) the entity has the ability to reliably measure the expenditures. Evidence in the problem indicates that the tablet is technologically and economically feasible (criteria 1 and 3), Simms has the ability to sell the product (criteria 2, 3, 5 (implied), and Simms anticipates a profit on tablet sales (criteria 4 and 6). Because technological and economic feasibility were met in quarter two, all costs thereafter, can be capitalized ($75,000). The $200.000 and $25,000 should be expensed as incurred because all criteria had not been met at that point.
D is incorrect. Simms may capitalize development costs if the following criteria are met: (1) technological feasibility of completing the asset for use or sale has been achieved; (2) the entity intends to complete and use or sell the asset; (3) the entity has the ability to use or sell the asset; (4) the entity understands how the asset will generate probable future economic benefits; (5) technical, financial, and other resources are available to complete development of the asset; (6) the entity has the ability to reliably measure the expenditures. Evidence in the problem indicates that the tablet is technologically and economically feasible (criteria 1 and 3), Simms has the ability to sell the product (criteria 2, 3, 5 (implied), and Simms anticipates a profit on tablet sales (criteria 4 and 6). Because technological and economic feasibility were met in quarter two, all costs thereafter, can be capitalized ($75,000). The $200.000 and $25,000 should be expensed as incurred because all criteria had not been met at that point.
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