Lump Sum Capital Purchases

Purchase of lump-sum Capital assets, also known as a basket purchase, is the purchase of capital assets in a group, with 1 single transaction and 1 lump-sum buying price. For instance, a company could purchase land appraised at $500,000, land improvements (parking lots or driveways) at $150,000 and a building appraised at $2 million for a total of $2 million. If this happens, accountants allocate the cost of the purchase among the different types of assets acquired based on their relative and total market values.

>> More Accounting Terms & Glossary?