Instructions- fill in the blanks by searching the answer in the standard, or ans
ID: 3574261 • Letter: I
Question
Instructions- fill in the blanks by searching the answer in the standard, or answer the question (MC or TF)
ASC 350-50
Website Development Costs
Website Development Costs
EITF Issue No. 00-2
"Accounting for Web Site Development Costs"
AICPA SOP 98-1
"Accounting for the Costs of Computer Software Developed or Obtained for Internal Use"
Activities to develop websites
1. Planning stage
2. Development stage
(1) Infrastructure development stage
(2) Application development stage
(3) Graphics development stage
(4) Content development stage
3. Operating stage
1. Planning stage costs are
a. expensed
b. capitalized and amortized over their useful life
c. capitalized and tested annually for impairment
2. Internet domain name costs should be:
a. expensed, as they are a period cost
b. capitalized
Development stage costs and Operating state costs require the application use of AICPA SOP 98-1
Rules of AICPA SOP 98-1
3. Which is not on of the three stages to develop software:
1. Preliminary project stage
2. Application development stage
3. Pre-application planning stage
3. Post-implementation/operation stage
4. Preliminary project stage
a. Costs are expensed as incurred
b. Costs are capitalized
5. Application development stage
Costs to develop internal-use software during the application development stage are:
a. expensed as incurred
b. capitalized
6. Post-implementation/operation stage
a. Costs are expensed as incurred
b. Costs are capitalized
7. Upgrades and enhancements to software
Costs may be capitalized if ___________________ is added
8. Capitalized software costs
a.Are amortized on a "straight line" basis over the estimated useful life
and should be reviewed for impairment
b. Are an intangible asset with an indefinite life and should be capitalized and reviewed for impairment, without amortization (similar to goodwill)
c. None of the above
Explanation / Answer
1. Planning phase cost are expensed means Answer is (a)
This stage is the very beginning of a website’s life–the thought process. Actions include determining the specific goals of the website, identifying the target audience, creating time and cost budgets, and determining the website’s functionalities.All development costs incurred during this stage should be expensed as incurred. This includes both internal and external costs.
2. Internet domain name should be expensed, as they are a period cost.
We have to pay domain name charges annually.
3. Pre-application planning stage
This is not a stage. Software Development cycle only consist three stages and those are Preliminary,Application development and Post-implementation.
4. Costs are expensed as incurred
This stage is considered to include making decisions about the allocation of resources, determining performance requirements, conducting supplier demonstrations, evaluating technology, and supplier selection.
5. capitalized
All development costs incurred during this stage should be capitalized as incurred once the conditions are met. This includes both internal and external costs. General & administrative and training costs are not considered development costs, and if incurred during this stage, should be expensed as incurred. Costs to convert old data into a new system should be expensed. However, if software was developed or purchased to convert data, these specific costs should be capitalized.
6. Costs are expensed as incurred
Charge all post-implementation costs to expense as incurred. Samples of these costs are training and maintenance costs.
7. Upgrades and enhancements to software costs may be capitalized if ___ functionality ___ is added.
The cost is Capitalized when we have to create the reports or when any software enhancements that enhance its functionality or extend its useful life.
8. Are amortized on a "straight line" basis over the estimated useful life and should be reviewed for impairment.
Capitalization of costs should begin after the preliminary stage has been completed, management commits to funding the project, it is probable that the project will be completed, and the software will be used for its intended function.
The capitalization of costs should end when all substantial testing has been completed. If it is no longer probable that a project will be completed, stop capitalizing the costs associated with it, and conduct impairment testing on the costs already capitalized.