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What is the treatment of migration and testing costs

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Question - Espi Outsourcing enters into a contract to operate CC School's information technology data center for 3 years. CPI Outsourcing incurs selling commission costs of 48,000 to obtain the contract. Before performing the services, Espi Outsourcing designs and builds a technology platform that interfaces with C's systems. That platform is not transferred to CC. CC promises to pay a fixed fee of P48,000 per month. Espi Outsourcing incurs the following costs: design services for the platform P72,000, hardware for the platform P240,000, software P144,000, and migration an testing of data center P156,000.

Required -

1. How should the P48,000 and the P72,000 be recognized?

2. What is the treatment of migration and testing costs - capitalized as an asset or expensed?

Reference no: EM132907961

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