Naresh Ltd. had the following transactions during the financial year 2022-2023: Naresh Ltd. acquired the running business of Sunil Ltd. for…
CA Intermediate · Advanced Accounting · RTP · May 2024
Naresh Ltd. had the following transactions during the financial year 2022-2023: Naresh Ltd. acquired the running business of Sunil Ltd. for 10,80,000 on 15 th May, 2022. The fair value of Sunil Ltd.'s net assets was - 5,16,000. Naresh Ltd. is of the view that due to popularity of Sunil Ltd.'s product in the market, its goodwill exists.Naresh Ltd. had taken a franchise on July 2022 to operate a restaurant from Sankalp Ltd. for 1,80,000 and at an annual fee of 10% of net revenues (after deducting expenditure). The franchise expires after 6 years. Net revenues were - 60,000 during the financial year 2022-2023.On 20 th August, 2022, Naresh Ltd, incurred costs of 2,40,000 to register the patent for its product. Naresh Ltd. expects the patent's economic life to be 8 years. Naresh Ltd. follows an accounting policy to amortize all intangibles on straight line basis over the maximum period permitted by accounting standards taking a full year amortization in the year of acquisition. Goodwill on acquisition of business to be amortized over 5 years (SLM) as per AS 14. Prepare a schedule showing the intangible assets section in Naresh Ltd. Balance Sheet at 31 st March, 2023.
Suggested Answer and Working Notes:
Naresh Ltd. Balance Sheet (Extract relating to intangible asset) as on 31 st March 2023 Assets Note No. ₹ (1) Non-current assets Intangible assets 1 8,11,200 Notes to Accounts (Extract) Particulars ₹ 1. Intangible assets Goodwill (Refer to note 1) 4,51,200 Franchise (Refer to Note 2) 1,50,000 Patents (Refer to Note 3) 2,10,000 8,11,200 Working Notes: ₹ (1) Goodwill on acquisition of business Cash paid for acquiring the business (purchase consideration) 10,80,000 Less: Fair value of net assets acquired (5,16,000) Goodwill 5,64,000 Less: Amortisation as per AS 14 ie. over 5 years (as per SLM) (1,12,800) Balance to be shown in the balance sheet 4,51,200 (2) Franchise 1,80,000 Less: Amortisation (over 6 years) (30,000) Balance to be shown in the balance sheet 1,50,000 (3) Patent 2,40,000 Less: Amortisation (over 8 years as per SLM) (30,000) Balance to be shown in the balance sheet 2,10,000
Topics: AS 14
Related Questions in this Topic
- Arzoo Ltd. is in the business of manufacture of Passenger cars and commercial vehicles. The company is working on a stra...
- A Limited and B Limited were amalgamated on 31 st March, 2025 to form a new company named AB Limited. Prior to the amal...
- Oasis Limited runs a famous chain of super markets and restaurants. Restaurant division constitutes 35% of total group r...
- Amalgamation adjustment reserve is opened in the books of the amalgamated company to incorporate
- Analyse the disclosure and presentation requirements of AS 24 for Discontinuing Operations (any five).