Reference no: EM132533167

Cabey acquires usage right to the a one year oracle ERP service. The agreement with oracle allows Cabey to use the ERP for one year. During the initial six-month period of the agreement, oracle has filed for bankruptcy as it has learned that its accounting department was involved in an extremely high risk option instrument that has resulted in a loss of 32 billion dollars. Oracle has thus can't provide further upgrade and advise on the ERP. However Cabey has still to pay 20 % of the contract price regardless of the performance of oracle as the contract states that additional 20 % of the contract price shall be paid to oracle for advisory service and the payment is not depend on any other event other than the passage of time. The costs were incurred by the company:

Legal cost of acquiring the copyrights 10 million

Operational loss (20 % payment made) 2 million

Massive training campaign to launch the ERP 1 million

Required

Question 1: Which of the above items is a cost that can be capitalized as an intangible asset?

Question 2: Explain why a directly attributable cost should be include as a part of initial cost of PPE?

Question 3: Explain the two methods with examples Cost model and Revaluation model.