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9. In a lump sum purchase of assets which of the following best describes the process by which the initial cost of the various assets should be determined? (1 Point) Allocation of the total cost to the individual assets on the basis of the fair value of the individual assets at the time of purchase. Allocation of the total cost to the individual assets on the basis of the historical cost of the individual assets to the original owner. Recording of the individual assets at their fair value with recognition of the gain or loss for the difference between the price and the fair value of the asset. Recording of the individual assets at their historical cost to the seller with gain or loss recognized as the difference between the price paid and the original cost figures.

Question

9. In a lump sum purchase of assets which of the following best describes the process by which the initial cost of the various assets should be determined? (1 Point) Allocation of the total cost to the individual assets on the basis of the fair value of the individual assets at the time of purchase. Allocation of the total cost to the individual assets on the basis of the historical cost of the individual assets to the original owner. Recording of the individual assets at their fair value with recognition of the gain or loss for the difference between the price and the fair value of the asset. Recording of the individual assets at their historical cost to the seller with gain or loss recognized as the difference between the price paid and the original cost figures.

9. In a lump sum purchase of assets which of the following best describes the process by which the initial cost of the various assets should be determined? (1 Point) Allocation of the total cost to the individual assets on the basis of the fair value of the individual assets at the time of purchase. Allocation of the total cost to the individual assets on the basis of the historical cost of the individual assets to the original owner. Recording of the individual assets at their fair value with recognition of the gain or loss for the difference between the price and the fair value of the asset. Recording of the individual assets at their historical cost to the seller with gain or loss recognized as the difference between the price paid and the original cost figures.

Solution

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SalmaMaster · Tutor for 5 years

Answer

### A. Allocation of the total cost to the individual assets on the basis of the fair value of the individual assets at the time of purchase.

Explain

## Step1: Understanding Lump Sum Purchase<br />### In a lump sum purchase, multiple assets are acquired for a single price. The challenge is to allocate this total cost among the individual assets.<br /><br />## Step2: Allocation Based on Fair Value<br />### The most common and appropriate method is to allocate the total cost based on the fair value of each asset at the time of purchase. This ensures that each asset is recorded at a value that reflects its current market worth.
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