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CA Intermediate · Advanced Accounting · AS 26 Intangible Assets

Gomti Software Ltd purchased a software licence under a deferred settlement arrangement. The price is ₹40 lakh payable after one year, and the cash price equivalent on the date of purchase was ₹36 lakh. The company also paid non-refundable purchase taxes of ₹2 lakh and legal fees of ₹1 lakh to make the licence legally effective, spent ₹1.5 lakh on training staff to use it, and incurred initial operating losses of ₹0.5 lakh. What is the cost of the intangible asset?

The cost is ₹39 lakh. For deferred settlement, the cash price equivalent of ₹36 lakh is used, with the ₹4 lakh difference treated as interest. Directly attributable non-refundable taxes of ₹2 lakh and legal fees of ₹1 lakh are added. Training costs and initial operating losses are expensed.

  1. A₹43.0 lakh
  2. B₹41.0 lakh
  3. C₹40.5 lakh
  4. D₹39.0 lakhCorrect

Explanation

For deferred payment, cost is the cash price equivalent, ₹36 lakh; the extra ₹4 lakh is interest, treated as an expense. Add directly attributable costs: non-refundable taxes ₹2 lakh and legal fees ₹1 lakh. Cost = 36 + 2 + 1 = ₹39 lakh. Training and initial operating losses are not part of cost.

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