 and welcome to the session in which you would look at a lump sum purchase or a basket purchase. What is a lump sum or a basket purchase? It's when a company buys a group of inventory in a single lump sum amount that's called a basket purchase. Now, it doesn't have to be inventory. Sometime a company might buy a group of property, plant and equipment. The same concept will apply. We're going to be using something called the relative sales value to determine the cost for the items purchased. For example, let's assume calls purchase a closing container for $5,000. So this is the container that we are discussing and they paid for this container for the whole thing $5,000. Now, the container included 20 coats, 300 t-shirts and 40 winter jackets. They did not buy the coats separately, the t-shirts separately or the winter jacket separately. They just purchased paying one lump sum, one price, $5,000. How do we have to determine what's the cost for the inventory for the individual item? Because eventually we have to sell them and when we sell a coat, we have to determine the cost of the coat to match it with the sale to determine our profit, our gross profit on that sale. The method we will use is called the relative sales value. Now, this topic is covered in intermediate accounting as well as the CPA exam. Whether you are an accounting student or a CPA candidate, I strongly suggest you take a look at my website, farhatlectures.com. I don't replace your CPA review course nor your accounting course. I'm a useful addition to your CPA review course. I can help you understand the material better by giving you examples, by giving you resources, additional resources that's going to help you practice. Your risk is one month of subscription. Your potential gain is passing the exam. If not for anything, take a look at my website to find out how well or not well your university doing on the CPA exam. I do have resources for other college courses such as intermediate, advanced taxation, governmental, so on and so forth. My CPA supplemental resources are aligned with your backer, Roger, Gleam and Wiley. So it's very easy to go back and forth between your CPA review course and my material. If you have not connected with me on LinkedIn, please do so. Take a look at my LinkedIn recommendation, like this recording, share it with other connect with me on Instagram, Facebook, Twitter and Reddit. So let's take a look at this solution to see how we will find the answer for that. First, we bought 20 coats, 300 teachers and 40 jackets. What we have to do is to find the fair value. Well, we estimate, we bring someone who knows about clothing and say, okay, tell us how much those 20 coats are worth. What's the fair value? They would say the coats, 2,750. The t-shirts, 2,000, those 300 t-shirts and the winter jackets, 3,200. In total is 7,950. Now what we're going to do, we're going to find the relative value of each item. We'll take the item itself divided by the total. The coats represent 35% of the purchase. The t-shirt represent 25% of the purchase and the winter jacket represent 40% of the purchase. This had to add up to 100%. Now what we do is we'll take the amount paid, which is the $5,000 multiplied by the relative for each group. And the coats, the cost of the coats, 1,750, the t-shirts, 2,250 and the winter jackets, 2,000. Now we can find the cost per unit. So each coat will take 1750 divided by 20, 2,250 divided by 300 and 2,000 divided by 400. And we'll find the price, not the price, the cost for each item separately, because when we sell a coat, if we sell a coat for 125, we're going to deduct 87,50 of the cost to find the gross profit. So this is how we find this out. Now we also need to know the journal entry. We're going to debit inventory 20 coats, 1750, inventory 300 t-shirts, 1250, inventory jackets, 2,000 and we credit cash. And this will be the journal entry. Now the point I'm trying to make here, yes, this is pretty straightforward, but you have to understand the relative fair value or the relative sales value. This is how you compute this. The concept will appear again when you do property, plant and equipment. When you have a, when we look at the revenue recognition concept, we also use the relative sales value to account to determine a price. So make sure you are comfortable with this topic. Now the best way to do this is to go to my website, farhatlectures.com, work additional multiple choice questions, see additional illustration and this way it will help you understand the material better. It will help you for your classroom, it will help you for your CPA exam. You pass your exam only once and it's a lifetime investment. Invest in yourself. The CPA exam is worth it and stay safe.