QS 24-19C Joint cost allocation LO C3 A company purchases a 9,680-square-foot co

Question

QS 24-19C Joint cost allocation LO C3 A company purchases a 9,680-square-foot commercial building for $360,000 and spends an additional $54,000 to divide the space into two separate rental units and prepare it for rent Unit A, which has the desirable location on the corner and contains 1,980 square feet, will be rented for $1.50 per square foot. Unit B contains 7,700 square feet and will be rented for $0.90 per square foot. How much of the joint cost should be assigned to Unit B using the value basis of allocation? Market Value Joint Cost Apportioned Percent of Market Value Cost Numerator Denominator | % of Mkt Value Unit A Unit B Totals

Explanation / Answer

Joint cost allocation :

Market value Percent of market value Joint cost Apportioned cost Numerator Denominator % of mkt value Unit A 1980*1.5 = 2970 2970 9900 30% 414000 124200 Unit B 7700*.90 = 6930 6930 9900 70% 414000 289800 Totals 9900 100% 414000

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