Chapter 9, Problem 9.2SE

To determine

Lump-sum (Group) Purchase of asset: Lump-sum purchase is a method of assignment of the cost of land and other assets. Sometimes, a company may purchase land and other assets in a lump-sum amount. In group purchase method, the lump-sum amount is apportioned between the various components of the lump-sum purchase.

• Lump-sum purchase consists of purchase of other assets with land by paying a lump-sum amount. It is also called basket purchase.
• That lump-sum amount (100%) is apportioned among land and other asset on the basis of their separate prices.
• The separate value of the asset indicates the relative market value of the asset.

To journalize: the lump-sum purchase of the three assets: land, building, and equipment.