In 2019, eGames spent $8,000,000 developing new software. Of this amount, $5,300,000 was spent before July 2019—when technological feasibility was established. The product was marketed to consumers beginning in September 2019. eGames estimates total revenue of $20,000,000 to be earned during the software’s three-year life (calculated from the September 1 product release date). During 2019, revenue of $10,000,000 was recognized.
Required:
1. Prepare the 2019 journal entries to record the development costs.
2. Compute the amount of amortization to be recognized in 2019 and prepare the appropriate journal entry, if any.
3. Next Level What is the justification for treating software development costs differently from R&D costs?
