Question: Esk Ltd Esk recently purchased a fully equipped restaurant at
Esk Ltd. (Esk) recently purchased a fully equipped restaurant at an auction for $500,000. The restaurant included all the equipment, furniture, and fixtures. The building itself is rented. Now Esk must allocate the purchase price to the items purchased. Explain how Esk should allocate the purchase price to the specific items. Why is it necessary for the purchase price to be allocated to the specific items? What motivations might influence the allocations that Esk makes?
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