An asset purchased according to a deferred payment plan should be recorded based on the total cash paid over the life of the plan.

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An asset purchased according to a deferred payment plan should be recorded at its present value, not based on the total cash paid over the life of the plan. This is because the buyer is effectively borrowing money to purchase the asset, and the present value reflects the time value of money and the risk of nonpayment. The total cash paid over the life of the plan may include interest or other charges, which should be accounted for separately.

An Asset Purchased According to a Deferred Payment Plan Should