Valuation of a Self and Constructed Asset Sales
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TEST BC's Software Development Division (SDD) has developed several architectural design software packages. One software package that they have developed is being sold to English Company for $250,000 or 325,000 pounds. The cost of developing the software was $195,000. As payment, BC has accepted a note receivable that is due in 5 years.
SDD has also developed a second software package. They incurred development costs of $410,000. They are trading this software package in exchange for a small office building. The fair market value of this building is $600,000.
In two separate Excel spreadsheet, make the accounting entry on BC's books for each software sale. Include 1-3 paragraphs discussing the accounting issues involved for each sale.
Use $235,000 as the discounted value of the note receivable.
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Solution Summary
The solution presents a comprehensive view of the issues involved in valuing software developed by the company. Currency issues are mentioned. The entries are given including explanations of issues and references to GAAP reporting.
Solution Preview
Excel is attached including explanations requested.
BC Software Development - Software 1
Debit Credit
Discount on note receivable 15,000
Note receivable - discounted value 235,000
Sale 250,000
To record the sale of software 1
Cost of sale 195,000
Inventory 195,000
To record the cost of sale
The issues with this event are
(1) in which currency to report the sale
(2) how to deal with the discounted note receivable
GAAP states that all transactions are recorded in USD for a US ...
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