CFA Practice Question

CFA Practice Question

During 2008, Palliser Corp. incurred costs to develop and produce a routine, low-risk computer software product with the following costs:

Completion of detail program design: $13,000
Costs incurred for coding and testing to establish technological feasibility: $10,000
Other coding costs after establishment of technological feasibility: $24,000
Other testing costs after establishment of technological feasibility: $20,000
Costs of producing product masters for training materials: $15,000
Duplication of computer software and training materials from product masters (1,000 units): $25,000
Packaging product (500 units): $9,000

In Palliser's December 31, 2008 balance sheet, what amount should be capitalized as software cost subject to amortization?
A. $59,000
B. $54,000
C. $69,000
Explanation: Costs incurred internally in creating a computer software product must be expensed when incurred as R&D until technological feasibility has been established. All software production costs incurred after technological feasibility is established and before the product is available for general release to customers shall be capitalized and amortized. In this case, $59,000 ($24,000 +20,000 + 15,000).

User Contributed Comments 4

User Comment
sireklove Hard to tell what was incurred before or after technological feasibility, such as "completion of detail program design". Costs of producing product masters didn't seem like development costs . . .
KD101 Training is not a developmental cost, it is implementation cost. Development costs are one before the product can actually work in a proto-type or test environment. Printing training manuals is not a development cost and if it is ten rest of the other costs should also qualify
jpducros Hint : For training and packaging products, the number of units is mentioned, so if you divide the total cost by the number of unit, you reach a very small amount per unit, which brings you to the conclusion that it is most likely expenses.
Ngana I am Failing to access the last three exams ( Mock 4, session two and Mock 5, session 1 and 2 )

Analyst notes please help me
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