CA Intermediate · Advanced Accounting · AS 26 Intangible Assets
Sagar Media Ltd acquired a film distribution right on 1 July 2025 for Rs 24 lakh, with a useful life of 6 years and nil residual value. It uses straight-line amortisation and prepares accounts to 31 March. What is the amortisation for 2025-26?
The amortisation for 2025-26 is Rs 3 lakh. Annual straight-line amortisation is Rs 24 lakh divided by 6 years, which is Rs 4 lakh. Since the right was held only from 1 July 2025 to 31 March 2026, nine months, the charge is Rs 4 lakh multiplied by 9/12.
- ARs 3 lakhCorrect
- BRs 4 lakh
- CRs 2 lakh
- DRs 6 lakh
Explanation
Annual amortisation is 24/6 = Rs 4 lakh. The asset was available for use for 9 months in 2025-26, so the charge is 4 x 9/12 = Rs 3 lakh. Charging a full year gives Rs 4 lakh, which ignores the part-year.
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