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CA Intermediate · Advanced Accounting · AS 26 Intangible Assets

On 1 October 2025, Godavari Media Ltd acquired a trademark from another company. Details: negotiated price Rs 40 lakh, less trade discount Rs 1 lakh; non-refundable transfer duty Rs 2 lakh; legal fees for transfer Rs 1.5 lakh; advertising to launch products under the trademark Rs 3 lakh; staff training Rs 0.5 lakh; allocated general overheads Rs 1 lakh. The trademark is available for use from 1 October 2025, has a useful life of 10 years, nil residual value, and is amortised straight-line on a time basis. What is its carrying amount at 31 March 2026?

The carrying amount is Rs 40.375 lakh. Cost is the net price Rs 39 lakh plus duty and legal fees, totalling Rs 42.5 lakh, excluding advertising, training and overheads. Six months of amortisation at Rs 4.25 lakh a year is Rs 2.125 lakh, leaving Rs 40.375 lakh.

  1. ARs 38.250 lakh
  2. BRs 40.375 lakhCorrect
  3. CRs 41.325 lakh
  4. DRs 44.650 lakh

Explanation

Cost = 40 - 1 + 2 + 1.5 = Rs 42.5 lakh; advertising, training and general overheads are expensed. Amortisation for 6 months = 42.5/10 x 6/12 = Rs 2.125 lakh. Carrying amount = 42.5 - 2.125 = Rs 40.375 lakh. Rs 38.25 lakh wrongly charges a full year; Rs 41.325 lakh ignores the trade discount.

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