Question 1

TechDev Inc. is developing software for internal use. The following costs were incurred:
1. Evaluation of alternatives: $20,000
2. Coding and testing: $150,000
3. Data conversion costs: $30,000
4. Training employees: $15,000

According to ASC 350-40, what amount should be capitalized?

Accepted Answer

Classify costs into 3 stages: 1) Preliminary Project (Expense), 2) Application Development (Capitalize), 3) Post-Implementation (Expense). Coding/Testing is Stage 2. Training is Stage 3.

Question 2

What mistakes do candidates make on this CPA question?

Accepted Answer

Capitalizing training or preliminary research costs.

How to approach this question

Full Answer

Common mistakes

Practice the full CPA BAR Practice Exam 5

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