CA Foundation · Accounting · Depreciation and Amortisation
Nirmal Pharma acquired a patent on 1 April 2023 for ₹12,00,000. Its useful life is estimated at 8 years with nil residual value, and the straight-line method is used. What is the carrying amount of the patent on 31 March 2025?
The carrying amount is ₹9,00,000. Annual straight-line amortisation is ₹12,00,000 divided by 8, which is ₹1,50,000. Two years to 31 March 2025 give ₹3,00,000 amortised, leaving ₹9,00,000 as the carrying value of the patent.
- A₹9,00,000Correct
- B₹10,50,000
- C₹9,60,000
- D₹8,00,000
Explanation
Annual amortisation = 12,00,000 / 8 = ₹1,50,000. For two years, accumulated amortisation = ₹3,00,000. Carrying amount = 12,00,000 - 3,00,000 = ₹9,00,000. The figure ₹10,50,000 reflects only one year of amortisation.
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