Pleasant Hills Properties is developing a golf course subdivision that includes 250 home lots;100 lots are golf course lots and will sell for $95,000 each;150 are street frontage lots and will sell for $65,000.The developer acquired the land for $1,800,000 and spent another $1,400,000 on street and utilities improvement.Compute the amount of joint cost to be allocated to the golf course lots using value basis.
A)$1,920,000.
B)$720,000.
C)$1,620,800.
D)$1,579,200.
E)$1,080,000.

Question

Quizplus · Accepted Answer

The total sales value is $15,500,000 ($9,500,000 for golf course lots + $6,000,000 for street frontage lots). The joint cost is $3,200,000 ($1,800,000 + $1,400,000). The allocation to golf course lots is ($9,500,000 / $15,500,000) * $3,200,000 = $1,579,200.

Pleasant Hills Properties Is Developing a Golf Course Subdivision That