Skip to content

CA Intermediate · Advanced Accounting · AS 26 Intangible Assets

Mehta Textiles Ltd bought a trademark by paying Rs 9,00,000 purchase price, Rs 50,000 non-refundable import duty, Rs 30,000 legal fees for registration, and Rs 20,000 as costs of introducing the product under the trademark (advertising). It also got a trade discount of Rs 40,000 on the price. What is the cost of the trademark?

The cost is Rs 9,40,000. It consists of the purchase price net of trade discount plus non-refundable duty and directly attributable legal fees. Costs of introducing a new product, such as advertising, are not part of the cost of an intangible asset and are expensed.

  1. ARs 9,40,000Correct
  2. BRs 9,60,000
  3. CRs 9,80,000
  4. DRs 10,00,000

Explanation

Cost = purchase price 9,00,000 - discount 40,000 + import duty 50,000 + legal fees 30,000 = Rs 9,40,000. Advertising costs of introducing the product are expensed. Rs 9,60,000 wrongly includes the advertising cost while ignoring the discount treatment inconsistently.

Did you get it right without looking?

One question tells you little. A timed set on AS 26 Intangible Assets shows your real accuracy, how long you take and where you lose marks.

Practise AS 26 Intangible AssetsFree diagnostic mock

More AS 26 Intangible Assets questions