ACCA Applied Knowledge · Financial Accounting · Intangible non-current assets and amortisation
Dunmore Co buys a patent on 1 April 20X1 for $240,000. It has a useful life of 8 years, no residual value, and the straight-line method is used with a full month's charge in the month of purchase. What is the carrying amount at 31 December 20X2?
The carrying amount is $187,500. Annual amortisation is $30,000 ($240,000 over eight years), and 21 months have elapsed from 1 April 20X1 to 31 December 20X2, giving accumulated amortisation of $52,500 and a remaining balance of $187,500.
- A$180,000
- B$187,500Correct
- C$195,000
- D$202,500
Explanation
Annual amortisation = 240,000/8 = 30,000. From 1 April 20X1 to 31 December 20X2 is 21 months, so accumulated amortisation = 30,000 x 21/12 = 52,500. Carrying amount = 240,000 - 52,500 = 187,500. The figure of 180,000 uses 2 full years only.
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