Belgrade Lakes Properties is developing a golf course subdivision that includes

Question

Belgrade Lakes Properties is developing a golf course subdivision that includes 225 home lots; 100 lots are golf course lots and will sell for $101,000 each; 125 are street frontage lots and will sell for $71,000. The developer acquired the land for $1,860,000 and spent another $1,460,000 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.)

$2,060,360.

$1,463,520.

$1,553,760.

$1,819,360.

$1,766,240.

Explanation / Answer

Answer:
Revenue from street frontage lots = 125 * $ 71,000 = $ 8,875,000
Revenue from golf course lots = 100 * $ 101,000 = $ 10,100,000
Total Revenue = $ 8,875,000 + $ 10,100,000 = $ 18,975,000
Percentage of Revenue from street frontage lots = 8,875,000 / 18,975,000 = 46.8%
Total Cost incurred by the developer = $1,860,000 + $1,460,000 = $ 3,320,000
Therefore, Joint Cost allocated to street frontage lots as per value basis
= Total cost * Percentage of Revenue from street frontage lots
= $ 3,320,000 * 46.8%
= $ 1,553,760 (answer).

Related Questions

Navigate

• Browse (All)
• Browse B
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.