At times, companies acquire more than one property, plant and equipment (PPE) for a single purchase price. The acquisition of two or more assets for a lump-sum cost is called “basket purchase” or ”lump-sum purchase”. The acquisition cost is allocated among the assets purchased using their relative fair-market values.Group of answer choicesTrueFalse

The purchase of a property that included land, building, and related improvements is called a lump-sum or basket purchase.Group of answer choicesTrueFalse

Interest may be included in the acquisition cost of a plant asset Group of answer choicesduring the construction period of a self-constructed asset.if the asset is purchased on creditif the asset acquisition is financed by a long-term note payableif it is a part of a lump-sum purchase.

In a lump-sum purchase of assets, the cost must be allocated to the individual assets becauseMultiple choice question.intangible assets must be identified and expensed.goodwill must be expensed immediately.the assets have different useful lives.

A goodwill is created when . A. Purchase price exceeds the net identifiable assets. B. Acquirer’s P/E is lower than target’s. C. Acquirer’s pro forma EPS is lower. D. Purchase price exceeds PPE.

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