Why should a company divide up the cost of a "basket purchase" among the different assets purchased?
A)A company with a longer list of assets will appear to be stronger.
B)Some of the assets might be paid for more quickly than others.
C)The different assets might be depreciated over different useful lives.
D)Baskets are not long-lived assets.

Question

Quizplus · Accepted Answer

When a "basket purchase" occurs,the total cost is split among the assets in proportion to the market value of the assets as a whole.Splitting the total purchase price among individual assets is necessary because they may be used over different periods.Land is never used up,so any costs assigned to Land will remain in that account until the company sells the land.

Why Should a Company Divide Up the Cost of a "Basket