Chapter 8, Problem 3E

To determine

Lump sum Purchase:

When the assets are purchased or bought in a lot in one transaction at a lump sum price that is called lump sum purchase. In lump sum purchase, apportion cost of purchase on the basis of relative market value can be anticipated by appraisal.

Plant Assets:

Plant assets are assets which are tangible in nature and are used in a company’s operations that have a useful life of more than one accounting period. Plant assets are also called as plant and equipment assets. They include all the normal cost and reasonable expenditures that are spent to put that particular plant asset to use.

Journal Entries:

Journal entries are the entries that are made in the books of accounts to record every transaction that happens in the business in the chronological order.

Accounting rules for journal entries:

• To Increase balance of the account: Debit assets, expenses, losses and credit all liabilities, capital, revenue and gains.
• To Decrease balance of the account: Credit assets, expenses, losses and debit all liabilities, capital, revenue and gains.

To prepare: Journal entry.