Question

When a company purchases a group of assets at a single lump sum price, the total cost should be allocated among the individual assets on the basis of:
(a) “cash basis” market value.
(b) fair value.
(c) brand value.
(d) historical value.

Is the anserw B correct?

Answer 1

Answer- When a company purchases a group of assets at a single lump sum price, the total cost should be allocated among the individual assets on the basis of = fair value (Option B).

Explanation- In a basket or group of assets purchased at a single lump sum price, the total acquisition costs is allocated to the individual assets by multiplying the single lump sum price the relative fair value of each assets.