A basket purchase is the acquisition of several transactions in one transaction.  More often than not, a single price is assigned to the entire purchase, and the accountants are left to sort out the details.  For instance, if ABC Development purchased a building and land for $599,000.  The “normal” course of action would be to ask an appraiser to determine the market value of each.  Typical results would be something like this:

 

Building          $350,000

Land                $300,000

Total                $650,000

 

ABC didn’t waste their money on the appraisal.  Even though they paid less than the appraised values (which is a good thing) they can still use this to assign reasonable values to both assets.  The appraisal indicated the land is worth 46% ($300,000 / $650,000) of the total value and the building is worth 54% ($350,000 / $650,000).  The accountants can apply these percentages to the purchase prices to make the following cost allocation:

 

Building          ($599,000 X 54%)      $323,460

Land                ($599,000 X 46%)      $275,540

Total                                                    $599,000