Explain the Appropriate Accounting Method Used to Account for Lump

question 26

Essay

Explain the appropriate accounting method used to account for lump sum purchases of a group of operational assets.

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Definitions:

Creditor Beneficiary

is a third party that benefits from a contract wherein the promisor agrees to pay the promisee's debt to the third party.

Incidental Beneficiary

An incidental beneficiary is a third party who may benefit from a contract between two other parties, even though the benefits were not directly intended for them.

Privity of Contract

The legal principle that a contract confers rights and imposes obligations only on the parties to the contract, barring any third party from enforcing or interfering with the agreement.

Policy Proceeds

The amount paid out on an insurance policy, typically upon the occurrence of the event insured against.