What is a lump-sum purchase?

What is a lump-sum purchase?

A lump-sum purchase occurs when you purchase assets in a group at once for a single price. With this type of transaction, the sales report or receipt doesn’t detail the price you pay for each individual item.

What is a lump-sum payment in accounting?

A lump-sum payment is an often large sum that is paid in one single payment instead of broken up into installments. They are sometimes associated with pension plans and other retirement vehicles, such as 401k accounts, where retirees accept a smaller upfront lump-sum payment rather than a larger sum paid out over time.

How is lump-sum purchase of assets calculated?

Example of a Lump-Sum Purchase The apportionment of the lump-sum purchase price to these assets is calculated as follows: Land: (($250,000/($250,000+$800,000)) x $1,000,000 = $238,095. Building: (($800,000/$250,000+$800,000) x $1,000,000 = $761,905.

How do you calculate a lump-sum?

You must use the mathematical formula: FV = PV(1+r)^n FV = Future Value PV = Present Value r = Rate of interest n = Number of years For example, you have invested a lump sum amount of Rs 1,00,000 in a mutual fund scheme for 20 years. You have the expected rate of return of 10% on the investment.

How is lump sum purchase of assets calculated?

How do you calculate lump sum?

What is a basket purchase of assets?

A basket purchase is the acquisition of a number of assets as a group, in a single purchase transaction. A basket purchase usually arises when the buyer has the opportunity to acquire a number of assets at a price below their combined market values.

When assets are purchased in a group for a single sum it is referred to as a?

When assets are purchased in a group for a single sum, it is referred to as a. basket purchase.

Why is the cost of a lump-sum purchase allocated to the individual assets acquired?

It is necessary to allocate a lump sum payment to individual items in order to record a fair portion of the lump sum in each of the proper general ledger accounts. the portion of the lump sum cost that is recorded in the Land account will not be depreciated.

What is lump sum example?

A lump sum payment is often associated with a single amount paid to acquire a group of items. For instance, a corporation might pay $50,000 for the inventory and equipment of a small manufacturer that is going out of business. The $50,000 is a lump sum payment.