Assignment - Software Costs

Creative Software is a firm that recently completed the development and testing of a new software program that provides the ability to transfer data to and from a variety of operating systems. The firm believes this product will be quite successful and has capitalized all of the costs of designing, developing, coding, and testing the software. Michael Leon, the President of Creative Software, located at 3200 Tech Avenue, Davie FL 33314 is your client. You are a newly hired staff member of FAU, Inc., an accounting firm located at 777 Glades Road, Boca Raton, FL 33431. Because Michael is unfamiliar with the proper accounting treatment of software costs according to United States Generally Accepted Accounting Principles (US GAAP) he has hired FAU, Inc. to explain the accounting treatments specified by US GAAP. (Adapted & Modified from SST 4th Edition)

Your firm has delegated to you the task of determining the treatment of software costs, and has asked that you prepare a four (4) page typed memo (not handwritten, 1.5 spacing -- not double spaced), including a works cited page (the 4th page of your memo should be designated as the works cited page; use MLA Format for your works cited page) to the client explaining

1. The standards that govern US GAAP treatment of software costs.

2. Whether Creative Software was correct in its treatment of the software development costs and why Creative Software's treatment was correct or incorrect.

3. Explain the appropriate methods for determining the amount of periodic amortization for any capitalized software development costs.

4. Explain how software costs should be presented and disclosed in the financial statements.

In addition, you are to formulate a question to ask the client that would help you determine the different types of software transaction(s) it is involved in, and include that in the conclusion of your memo.

This memo is expected to be professional and informative. Remember the purpose of the memo and the audience that it is addressing.

Follow the proper format for a memo, as presented in May & May, Effective Writing: A Handbook for Accountants. 10th ed. I will allow sub-headings in your memo.

Hint: I suggest you start by reading pages 559-562 (Chapter 10) in your textbook to help guide you on how to conduct your research.

Remember to include headings, a proper introduction that previews your headings, and a conclusion. When citing sources within your memo and preparing a works cited page, please follow the formats illustrated in the May & May text on pages 162-164. Please be sure to prepare your memo according to the proper format for a memo, as presented in May & May, Effective Writing: A Handbook for Accountants. You may include tables and / or vertical enumerated points to illustrate the information you are providing to your client.

You must turn in a hard copy of your writing assignment in class on the due date assigned per the syllabus and upload your writing assignment via blackboard by clicking on the Writing Assignment Due link provided in blackboard. You must do both: submit a hard copy in class and upload your writing assignment via blackboard.

NOTE: This is an individual exercise. You may not collaborate with anyone on this assignment! If your memo is substantially similar (e.g., very similar wording and phrasing) to a memo submitted by another student, I will consider the similarity as evidence that you collaborated with that individual. In that case, both you and the other student will receive zero (0) points on this assignment.

IMPORTANT WARNING: If your writing assignment score includes 3 or more of the student learning outcomes in the Developing category, most likely you will fail this assignment.