In a "basket" or "lump-sum" purchase of assets,which of the following best describes the process by which the historical cost of the various assets acquired should be determined?
A) Allocation of the total cost to the individual assets on the basis of the historical cost of the individual assets to their original owner.
B) Allocation of the total cost to the individual assets on the basis of the fair market value of the individual assets at the time of the "basket" purchase.
C) Recording of the individual assets at their current value with recognition of a gain or loss for the difference between the price paid for the assets and the current value of the individual assets.
D) Recording of the individual assets at their original historical cost to the seller with a gain or loss recognized as the difference between the total of the original historical cost figures and the price paid in the basket purchase.

Question

Quizplus · Accepted Answer

The correct process for determining the historical cost of various assets acquired in a basket purchase is to allocate the total cost to the individual assets based on their fair market value at the time of the purchase. This method ensures that the recorded cost reflects the current economic value exchanged.

In a "Basket" or "Lump-Sum" Purchase of Assets,which of the Following