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CA Intermediate · Advanced Accounting · AS 26 Intangible Assets

Anand Ltd. acquired a patent on 1 April 2023 for Rs 20,00,000 with useful life of 10 years, amortised straight-line, nil residual. On 31 March 2026 the recoverable amount of the patent is Rs 11,00,000. Ignoring other factors, what is the net carrying amount at 31 March 2026 after considering impairment under AS 28, and the amortisation charged for 2026-27 if the remaining life stays at 7 years?

The carrying amount becomes Rs 11,00,000 and the next year's amortisation is Rs 1,57,143. After three years of amortisation the book value is Rs 14,00,000, which exceeds the recoverable amount, so Rs 3,00,000 is written off, and Rs 11,00,000 is spread over the remaining seven years.

  1. ARs 11,00,000 and Rs 1,57,143Correct
  2. BRs 14,00,000 and Rs 2,00,000
  3. CRs 11,00,000 and Rs 2,00,000
  4. DRs 14,00,000 and Rs 1,57,143

Explanation

Accumulated amortisation for 3 years = 2,00,000 x 3 = 6,00,000; carrying amount = 14,00,000. Recoverable amount 11,00,000 is lower, so impairment loss is 3,00,000 and the carrying amount becomes 11,00,000. Revised amortisation = 11,00,000/7 = 1,57,143. Options keeping 14,00,000 ignore impairment.

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