AC 301 Question 5. Question : Arizona Communications contracted to set up a call center for the City of Phoenix. Under the terms of the contract, Arizona Communications will design and set-up a call center with the following costs:
Design of call center $10,000
Computers, servers, telephone equipment $275,000
Software $85,000
Installation and testing of equipment $15,000
Selling commission $25,000
Annual service contract $50,000
In addition, Arizona Communications will maintain and service the equipment and software to ensure smooth operations of the call center for an annual fee of $90,000. Ownership of equipment installed remains with the City of Phoenix. The contract costs that should be capitalized is
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