In the following cases, record Journal Entries for amortization in the books of Huge Ltd. for the year ended 31st March, 2025 with reference to…
CA Intermediate · Advanced Accounting · MTP · January 2026
In the following cases, record Journal Entries for amortization in the books of Huge Ltd. for the year ended 31st March, 2025 with reference to AS-26: The company had acquired Patent Rights for 340 lakhs on 01.04.2023. The estimated product life is 4 years. Amortization was decided in the ratio of estimated future cash flows which are as under: 1 st Year 140 Lakhs 2 nd Year 350 Lakhs 3 rd Year 280 Lakhs 4 th Year 420 Lakhs
Suggested Answer and Working Notes:
(i) Journal Entry for the year ended on 31st March 2025 ₹ in lakhs ₹ in lakhs 31.3.25 Amortization A/c (340 × 350/1,190) Dr. 100 To Patent Rights A/c 100 P&L A/c Dr. 100 To Amortization A/c 100 Working note Huge Limited amortised 340lakhs during next 4 years on the basis of net cash flows arising of the product. The amortisation for second year will be worked out as under: 340 x 350/1,190 (140+350+280+420) = 100 lakhs
Topics: AS 26
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