Question

26.

Pleasant Hills Properties is developing a golf course subdivision that includes 225 home lots; 100 lots are golf course lots and will sell for $103,000 each; 125 are street frontage lots and will sell for $73,000. The developer acquired the land for $1,880,000 and spent another $1,480,000 on street and utilities improvement. Compute the amount of joint cost to be allocated to the street frontage lots using value basis. (Round your intermediate calculation to one decimal place.)

Multiple Choice

$1,780,800.

$1,478,080.

$1,579,200.

$2,074,920.

$1,833,920.

Answer 1

Amount of joint cost to be allocated to the street frontage lots = $1,579,200

Workings

Total Sales Value = [ 100 Lots x $103,000 ] + [ 125 Lots x $73,000 ]

= $1,03,00,000 + $91,25,000

= $1,94,25,000

Percentage of Sale Value of the street frontage to the total sale value

= [ $91,25,000 / $1,94,25,000 ] x 100

= 47%

Amount of joint cost to be allocated to the street frontage lots

= Total Costs x Percentage Proportion

= [ $18,80,000 + 14,80,000 ] x 47%

= $33,60,000 x 47%

= $15,79,200

Hence, the answer is $1,579,200.