Pleasant Hills Properties is developing a golf course subdivision that includes
ID: 2436180 • Letter: P
Question
Pleasant Hills Properties is developing a golf course subdivision that includes 225 home lots; 100 lots are golf course lots and will sell for $110,000 each; 125 are street frontage lots and will sell for $80,000. The developer acquired the land for $1,950,000 and spent another $1,550,000 on street and utilities improvement. Compute the amount of joint cost to be allocated to the golf course lots using value basis. (Round your intermediate calculation to one decimal place.)
$2,128,120.
$1,531,280.
$1,834,000.
$1,887,120.
$1,666,000.
Pleasant Hills Properties is developing a golf course subdivision that includes 225 home lots; 100 lots are golf course lots and will sell for $110,000 each; 125 are street frontage lots and will sell for $80,000. The developer acquired the land for $1,950,000 and spent another $1,550,000 on street and utilities improvement. Compute the amount of joint cost to be allocated to the golf course lots using value basis. (Round your intermediate calculation to one decimal place.)
Explanation / Answer
Total joint cost=land cost+other expenses =1950000+1550000=3500000
Value of golf course =100*110000=11000000
Value of street frontage lots=125*80000=1000000
Total sales value=21000000
Allocated joint cost of golf course =total sales value of golf/total sales value*joint cost
=11000000/21000000*3500000=1833333.33
Rounding off to nearest 1834000. Option c is correct.there is difference due to Rounding off but the process is correct .