Final answer:
A company should divide up the cost of a "basket purchase" among the different assets purchased in order to accurately reflect the value and worth of each individual asset in their financial statements.
Step-by-step explanation:
When a company makes a "basket purchase", it means that they are buying a group of assets together for a single purchase price. In order to accurately allocate the purchase price among the different assets, the company needs to divide up the cost based on the fair market value of each asset. This is done to ensure that the company's financial statements reflect the true value and worth of each individual asset.
For example, let's say a company buys a basket of assets that includes a building, a piece of land, and some equipment. The total purchase price is $1 million. The company would need to determine the fair market value of each asset. If the building is worth $700,000, the land is worth $200,000, and the equipment is worth $100,000, then the company would assign the corresponding portion of the purchase price to each asset based on their values.By dividing up the cost of the "basket purchase", the company can accurately track and report the value of each asset. This can be important for financial reporting, taxation purposes, and decision-making within the company.