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Software Development Division of XYZ Company

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XYZ's Software Development Division (SDD) has developed several architectural design software packages. One software package that they have developed is being sold to an English Company for $310,000 or 385,000 pounds. The cost of developing the software was $255,000. As payment, XYZ has accepted a note receivable that is due in 5 years.

SDD has also developed a second software package. They incurred development costs of $500,000. They are trading this software package in exchange for a small office building. The fair market value of this building is $675,000.

Assignment: Discuss the accounting issues that SDD will need to account for with the sale of these two assets.

Explain XYZ's business with regard to software production.
How will the company need to account for the sale of these two assets?
What problems, if any, will XYZ encounter given the sale provisions accepted for these two assets?

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Solution Preview

Explain XYZ's business with regard to software production.

XYZ develops software packages which will be eventually sold to third parties either outright or as license. Moreover, the company is prepared to accept cast, IOUs and other assets in exchange for these software packages.

How will the company need to ...

Solution Summary

This solution discusses the accounting issues that the software development division of XYZ company will need to account for.