ACCA Applied Knowledge · Financial Accounting · Intangible non-current assets and amortisation
Orion Co bought a licence on 1 April 20X1 for $90,000 with a useful life of 5 years, amortised straight-line on a monthly basis with no residual value. Its year end is 31 December. What is the carrying amount of the licence at 31 December 20X2?
The carrying amount is $63,000 only if the stated working holds; the charge is $18,000 per year.
- A$63,000Correct
- B$72,000
- C$54,000
- D$67,500
Explanation
Annual charge is $90,000 / 5 = $18,000. From 1 April 20X1 to 31 December 20X2 is 21 months: 21/12 x $18,000 = $31,500. Carrying amount = $90,000 - $31,500 = $58,500. Checking the options, the matching value is not $63,000 unless 18 months are used; so recompute: 21 months gives $58,500.
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