Assets acquired in a lump-sum purchase are valued based on:
A) Their assessed valuation.
B) Their relative fair values.
C) The present value of their future cash flows.
D) Their cost plus the difference between their cost and fair values.

Question

Quizplus · Accepted Answer

Assets acquired in a lump-sum purchase should be valued based on their relative fair values, which means allocating the total purchase price to individual assets based on their fair values at the date of acquisition. This method provides a more accurate reflection of the assets' underlying value and is in accordance with generally accepted accounting principles. Valuing assets based on assessed valuation, the present value of their future cash flows, or their cost-plus difference between cost and fair values are not appropriate methods for determining the value of assets acquired in a lump-sum purchase.

Assets Acquired in a Lump-Sum Purchase Are Valued Based On