Capitalized costs: It is an expense which is added to the fixed assets of the company’s financial statements. These costs are written off over the life of the asset as depreciation and not treated as written off as expense in the year it is incurred.
(a)
To explain: To explain the accounting for capitalized costs changes if the contract is for 1 year rather than 3 years.
Given information: All the information related to R is provided in the question document.
(b)
To determine the uncertainty affects the amount of revenue to be recognized under the contract. R is a start-up company; as a result, there is more than insignificant uncertainty about D’s ability to make the 6-month payments on time.
Given information: All the information related to R is provided in the question document.
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Intermediate Accounting, 17th Edition
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