$(4$b$)$ Skebus Inc. has built its reputation on being very customer$-$friendly. When a customer

reports dissatisfaction with a newly installed system, the firm generally sends a team on site to

adjust the system according to the client$$s wishes free of charge. At the end of the year, it

appears that the implementation project at their new Greek customer did not turn out to the

client$$s wishes. Skebus Inc. estimates the costs of sending a team to the client and reparametrizing the system at $200$ CU$.$ It is under no legal obligation to do that.

Required: Discuss, what provisions should be recognized and what contingent liabilities

should be disclosed!

$(5)($a$)$ On Jan $1,$ X$0,$ Skebus Inc has to recognize a provision due on Dec $31,$ X$2.$ It expects to

pay $100,000$ CU on Dec $31,$ X$2.$ It uses a discount rate of $5\%.$

$($b$)$ On Dec $31,$ X$1,$ it estimates that the payment will be $120,000$ CU $($discount rate still $5\%.)$

$($c$)$ On Dec $31,20$X$2,$ it pays $120,000$ CU$.$

Required: Prepare the Journal entries $($a$)$ on Jan $1,$ X$0$ and December $31,$ X$0,($b$)$ on Dec

$31,$ X$1,($c$)$ on Dec $31,$ X$2?$

$(6)($a$)$ The reputation Skebus Inc. has earned through its premium products and first$-$class

customer service is considered a major competitive advantage by industry experts. According

to experts, the $$Skebus$$ brand is worth around $500$ CU$.$ The most decisive factor explaining

Skebus Inc.$$s market success is doubtlessly their skilled and loyal staff. A recent due diligence

study carried out in the context of an abandoned merger project estimated their contribution to

total firm value at $2\mathrm{.}000$ CU$.$

$($b$)$ In order to ensure its continued market success, Skebus Inc. has started a research project

in X$0$ and has expended $480$ CU on it$.$ The purpose of the research project is to find out the

future technology needs of educational institutions. Its results are expected to have a major

impact on future software development projects.

$($c$)$ In Jan, X$0,$ Skebus Inc has acquired a software platform that it uses to develop its own

applications. It has paid $1\mathrm{.}200$ CU for the software and expects to use it for the next $10$ years.

Required: Discuss $($ie give the amount and explain$)$ the value at which the intangible

assets in $($a$),($b$)$ and $($c$)$ should be carried in the X$0$ statement of financial position.

$(7)$ Skebus Inc. concludes a contract under which it provides hardware to a customer and

installs software on it$.$ The hardware is delivered in Jan, X$0,$ and the software is installed on it$.$

The customer obtains the right to use the software for one year. The total price paid in march,

X$0,$ is $200$ CU$.$ The firm sells the hardware and the software also separately from one another.

The independent selling prices of the hardware and a one$-$year license for the software are $80$

CU and $120$ CU$.$ The revenue recognition pattern for Skebus Inc is as follows:

a$)16,667$ CU per month for each of the $12$ months in X$0.$

b$)200$ CU in January X$0.$

c$)200$ CU in March X$0.$

d$)200$ CU in December X$0.$

e$)90$ CU in January X$0$ and $10$ CU for each of the remaining months in X$0.$

Required: Mark the correct solution and explain your choice!