Asked by Jalyn Lankford on Jun 19, 2024
Verified
When plant assets are purchased as a group in a single transaction for a lump-sum price,the cost of the purchase is allocated among the different types of assets acquired based on their relative market values.
Lump-sum Price
This is a total amount agreed upon for a contract that is not itemized or broken down into individual costs or charges.
Relative Market Values
The comparison of an item’s market price to other similar items in the relevant market.
- Identify the components and calculations involved in asset purchase, including cost allocation and capitalization.
Verified Answer
TJ
Tatyana JuarezJun 21, 2024
Final Answer :
True
Explanation :
This statement is true. When plant assets are purchased as a group for a lump-sum price, the cost must be allocated among the different types of assets acquired based on their relative market values. This process is called allocation of purchase price.
Learning Objectives
- Identify the components and calculations involved in asset purchase, including cost allocation and capitalization.
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