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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.
Disposal of Assets: Disposal is an activity of selling the worn-out assets that is no longer in need for the business, in return of some consideration. Disposal may be made in any of the following situations:
- Disposal with no gain no loss: When the asset is disposed with no consideration received.
- Disposal with gain: When the asset is disposed for more than its book value (original cost less
accumulated depreciation ). - Disposal with loss: When the asset is disposed for less than its book value.
To record: the
To record: the journal entry for the lump-sum purchase of land and communication equipment on April 1, 2018.
To record: the journal entry for the
To record: the journal entry for the disposal of the building on September 1, 2018.
To record: the journal entry for the depreciation expense of the communication equipment on December 31, 2018.
To record: the journal entry for the depreciation expense of the office equipment on December 31, 2018.
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Chapter 9 Solutions
Horngren's Financial & Managerial Accounting, The Managerial Chapters, Student Value Edition (6th Edition)
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