Karen Austin Corporation has capitalized software costs of $709,500, and sales of this product the first year totaled $395,130. Karen Austin anticipates earning $921,970 in additional future revenues from this product, which is estimated to have an economic life of 4 years. Compute the amount of software cost amortization for the first year.
(a) Compute the amount of software cost amortization for the first year using the percent of revenue approach.
(b) Compute the amount of software cost amortization for the first year using the straight-line approach.
(Gross Profit Method)
Astaire Company uses the gross profit method to estimate inventory for monthly reporting purposes. Presented below is information for the month of May.
Inventory, May 1 $180,800
Purchases (gross) 723,200
Freight-in 33,900
Sales 1,130,000
Sales returns 79,100
Purchase discounts 13,560
(a) Compute the estimated inventory at May 31, assuming that the gross profit is 25% of sales.
(b) Compute the estimated inventory at May 31, assuming that the gross profit is 25% of cost.