An entity acquires for 500,000 a manufacturing licence allowing it to produce at most 200,000 units of a patented component, within a term of 10 years. It expects to reach this cap well before the end of the term: the benefits of the licence are therefore consumed as production occurs. It produces 50,000 units in the first year. No residual value is expected. What is the amortisation charge for the first year?
- Cost of the licence
- 500,000
- Authorised production cap
- 200,000
- Production in the first year
- 50,000
- Contractual term
- 10