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Acquisition costs areincurred to acquire new assets or a business. These costs can be incurred in three common ways: mergers and acquisitions, fixed resources, and client acquisition

The equipment account should be invoice for all materials and direct labor utilized in its construction. Importantly, no benefit of self-construction should be documented because this method contradicts the historical cost principle. The debate is about how indirect expenses, such as power, heat; light, insurance, and property taxes on manufacturing buildings need to be allocated. Below are the possible approaches.

Many pupils feel that the asset's cost should only include the variable overhead expenses that arise from the construction. This method implies that the company's fixed costs will remain the same whether the asset is built or not; hence allocating a portion of the constant overhead costs to the equipment will reduce current expenses and, as a result, overestimate current period income. As a result, only the additional expenses should be assessed.

Alternative (2) proponents say that such assets should be treated the same as inventory items, with all expenses allocated to them as if saleable things were being created. They argue that no special treatment should be given in cost allocation as long as appropriate information is provided to make the decision. They suggest overhead to permanent assets at regular intervals, comparable to allocating to joint goods and byproducts. Of course, no item should be capitalized at a higher rate than the current market rate.

It might be argued that the $273,000 additional expenditures should be assigned to all four machines because development costs are typically greater on the first few units. The additional expenses should be expensed if they are related to inefficiency rather than development expenditures.