Question

How are the values attributed to the different assets determined in a basket purchase?

Answer 1

A basket purchase is also called lumpsum acquisition, means there is a purchase of many assets as a one group. Whenever an investor purchases a basket of assets means that investor is purchasing many assets. These assets may of different securities, machineries, equipments puchases as a group.

It is usually a single puchase transaction. It arrised when buyer gets opportunity to purchase number of assets at a price below their combined market values.

Followings steps are involved in basket purchase for accounting purpose:

- Identify the considertion paid for basket purchase

- Identify the assets included in basket and the quatities of assets

- Assigning the costs which can be directly assigned to specific assets.

- Finding out the appraised values of whose cost is not specifically identified in the transaction.

- Allocating the remaining payment to the remaining assets in proportion of their appraised values.