CA Foundation · Accounting · Depreciation and Amortisation
Rao Technologies Ltd. bought a technical know-how licence on 1 April 2022 for ₹16,00,000, amortised straight-line over 8 years with nil residual value. On 31 March 2024 the licence was sold for ₹11,00,000. What is the profit or loss on sale?
The sale gives a loss of ₹1,00,000. Two years of amortisation at ₹2,00,000 leave a carrying amount of ₹12,00,000, and sale proceeds of ₹11,00,000 are below this.
- ALoss of ₹1,00,000
- BProfit of ₹3,00,000
- CProfit of ₹1,00,000Correct
- DLoss of ₹5,00,000
Explanation
Annual amortisation = 16,00,000 / 8 = ₹2,00,000. Up to 31 March 2024 two years are amortised: ₹4,00,000, so carrying amount is ₹12,00,000. Sale proceeds of ₹11,00,000 are less than that, so there is a loss of ₹1,00,000.
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