A company began a new software development project in 2023. The project reached technological feasibility on June 30, 2024, and was available for release to customers at the beginning of 2025. Development costs incurred prior to June 30, 2024, were $3,260,000 and costs incurred from June 30, 2024, to the product release date were $1,460,000. The economic life of the software is estimated at four years. For what amount will software be capitalized in 2024?
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A company began a new software development project in 2023. The project reached technological feasibility on June 30, 2024, and was available for release to customers at the beginning of 2025. Development costs incurred prior to June 30, 2024, were $3,260,000 and costs incurred from June 30, 2024, to the product release date were $1,460,000. The economic life of the software is estimated at four years. For what amount will software be capitalized in 2024?
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- During 2020, PC Software Inc. developed a new personal computer database management software package. Total expenditures on the project were $1,800,00O, of which 40% occurred after the technological feasibility of the product had been established. The product was completed and offered for sale on January 1, 2021. During 2021, revenues from sales of the product totaled $3,000,000. The package is expected to be successfully marketable for five years, and the total revenues over the life of the product are estimated to be $10,000,000. At December 31, 2021, the carrying value of the software intangible asset is $864,000. O $504,000. O $1,080,000. O $720,000.Early in 2021, the Excalibur Company began developing a new software package to be marketed. The project was completed in December 2021 at a cost of $6 million. Of this amount, $4 million was spent before technological feasibility was established. Excalibur expects a useful life of five years for the new product with total revenues of $10 million. During 2022, revenue of $3 million was recognized.Required:Prepare a journal entry to record the 2021 development costs.Early In 2021, the Excalibur Company began developing a new software package to be marketed. The project was completed in December 2021 at a cost of $13 million. Of this amount, $10 million was spent before technological feasibility was established. Excalibur expects a useful life of five years for the new product with total revenues of $16 million. During 2022, revenue of $4 million was recognized. Required: Prepare a journal entry to record the 2021 development costs. (If no entry is required for a transaction/event, select "No Journal entry required" in the first account field. Enter your answers in whole dollar not in millions.) View transaction list Journal entry worksheet < 1 Record the 2021 development costs. Note: Enter debits before credits. Transaction 1 Record entry General Journal Clear entry Debit Credit View general journal A
- During 2020. PC Software Inc. developed a new personal computer database management software package. To- tal expenditures on the project were $3,000,000, of which 40% occurred after the technological feasibility of the product had been established. The product was completed and offered for sale on January 1, 2021. During 2021, revenues from sales of the product totaled $4,800,000. The package is expected to be successfully marketable for five years, and the total revenues over the life of the product are estimated to be $20,000,000. Required a. Prepare the journal entries to account for the development of this product in 2020. b. Prepare the journal entries to record the amortization of capitalized computer software development costs in 2021. c. What disclosures are required in the December 31, 2021, financial statements regarding computer software costs? d. Suppose this product were developed for internal use. How would your answers to (a), (b), and (c) change?XYZ is evaluating a project that would require the purchase of a piece of equipment for $440,000 today. During year 1, the project is expected to have relevant revenue of $786,000, relevant costs of $201,000, and relevant depreciation of $132,000. XYZ would need to borrow $440,000 today to pay for the equipment and would need to make an interest payment of $33,000 to the bank in 1 year. Relevant net income for the project in year 1 is expected to be $337,000. What is the tax rate expected to be in year 1? A rate equal to or greater than 21.96% but less than 26.61% A rate less than 21.96% or a rate greater than 46.34% A rate equal to or greater than 31.02% but less than 38.39% A rate equal to or greater than 38.39% but less than 46.34% A rate equal to or greater than 26.61% but less than 31.02%Striped Potato is evaluating a project that would require the purchase of a piece of equipment for $365,000 today. During year 1, the project is expected to have relevant revenue of $216,000, relevant costs of $57,000, and relevant depreciation of $84,000. Striped Potato would need to borrow $365,000 today to pay for the equipment and would need to make an interest payment of $14,000 to the bank in 1 year. Relevant net income for the project in year 1 is expected to be $44,000. What is the tax rate expected to be in year 1?
- XYZ is evaluating a project that would require the purchase of a piece of equipment for $580,000 today. During year 1, the project is expected to have relevant revenue of $756,000, relevant costs of $199,000, and relevant depreciation of $136,000. XYZ would need to borrow $580,000 today to pay for the equipment and would need to make an interest payment of $30,000 to the bank in 1 year. Relevant net income for the project in year 1 is expected to be $322,000. What is the tax rate expected to be in year 1? A rate equal to or greater than 19.95% but less than 24.42% A rate equal to or greater than 28.03% but less than 37.53% A rate equal to or greater than 37.53% but less than 51.10% A rate equal to or greater than 24.42% but less than 28.03% A rate less than 19.95% or a rate greater than 51.10%Consider the following financial information about a retooling project at a computer manufacturing company: The project costs $2 million and has a five-year service life. The project can be classified as a seven-year property under the MACRS rule. At the end of the fifth year, any assets held for the project will be sold. The expected salvage value will be about 10% of the initial project cost. The firm will finance 40% of the project money from an outside financial institution at an interest rate of 10%. The firm is required to repay the loan with five equal annual payments. The firm's incremental (marginal) tax rate on this investment is 35%. The firm's MARR is 18%.Use this financial information to complete the following tasks:(a) Determine the after-tax cash flows.(b) Compute the annual equivalent cost for this project.Johnson inc. is about to start a two year project. It will require an upfront investment of $200,000 in a new machine to get started (this initial investment will be made today, at time t = 0). At the end of year one (time t = 1), the project will generate sales of $418,000, costs of good sold of $384,000, and depreciation expense of $100,000. At the end of year two, the project will generate sales of $728,000, costs of good sold of $481,000, and depreciation expense of $100,000. To get started, an investment in working capital of $232,000 is needed at time t = 0. None of the working capital will be recouped at the end of the project, and at the end, the machine will also be scrapped. What is the NPV of the project if the opportunity cost of capital is 12% and the tax rate is 31%?
- A company is considering the purchase of a major piece of equipment for its manufacturing plant. The project would cost $22m in initial investment and would result in cost savings, before tax, of $3.25m per year for five years. The company completed a cost survey prior to going ahead which cost a total of $200,000. The company has to borrow $5m to help finance the project. The interest cost is $200,000 per year for the duration of the project. The equipment could be sold for $4.5m at the end of the five years. The equipment would also result in an increase in NWC of $500,000, which will be recovered at the end of the project. The company’s CCA rate is 25% and the corporate tax rate is 34%. The company's WACC is 9.39% Calculate PVCCATs using the Tax Shield ApproachSpotted Potato is evaluating a project that would require the purchase of a piece of equipment for $496,000 today. During year 1, the project is expected to have relevant revenue of $405,000, relevant costs of $158,000, and relevant depreciation of $110000. Spotted Potato would need to borrow $496,000 today for the equipment and would need to make an interest payment of $28,000 to the bank in 1 year. Relevant operating cash flow for the project in year 1 is expected to be $192,000. What is the tax rate expected to be in year 1? 40.15% (plus or minus 3 bps) 14.94% (plus or minus 3 bps) 56.26% (plus or minus 3 bps) 19.71% (plus or minus 3 bps) none of the answers are within 3 bps of the correct answerA company is thinking about marketing a new product. Up-front costs to market and develop the product are $13.60 Million. The product is expected to generate profits of $2.48 million per year for 26 years. The company will have to provide product support expected to cost $218348 per year in perpetuity. Furthermore, the company expects to invest $40739 per year for 10 years for renovations on the product. This investing would start at the end of year 7. Assume all profits and expenses occur at the end of the year. Calculate the NPV of this project if the interest rate is 6.91%
