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 $106,000 each; 125 are street frontage lots and will sell for $76,000. The developer acquired the land for $1,910,000 and spent another $1,510,000 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.)

Multiple Choice

$1,617,660.

$1,499,620.

$1,802,340.

$1,855,460.

$2,096,460

Answer 1

Total joint costs

= Cost of land + Street and utilities improvement

= $1,910,000 + $1,510,000

= $3,420,000

The joint costs have been allocated as per the following table

Calculations	A	B	C = A x B	D = C / 20100000	E	F = D x E
Particulars	Quantity	Rate	Value	Percentage of Total	Joint costs	Allocated costs
Golf course lots	100	106,000	10,600,000	52.70%	3,420,000	1,802,340
Street frontage lots	125	76,000	9,500,000	47.30%	3,420,000	1,617,660
		Total	20,100,000

So, as per above calculations, option C is the correct option