Pleasant Hills Properties is developing a golf course subdivision that includes 225 home lots; 100 lots are golf course lots and will sell for $109,000 each; 125 are street frontage lots and will sell for $79,000. The developer acquired the land for $1,940,000 and spent another $1,540,000 on street and utilities improvement. Compute the amount of joint cost to be allocated to the street frontage lots using value basis.

$11,707,990.4

Explanation:

For computation of joint cost to be allocated to the street frontage lots using value basis first we need to find out follow some steps which is shown below:-

Total cost of golf course lots = Sold cost of golf course × Number of lots

= $109,000 × 100

= $10,900,000

Total cost of street frontage lots = Sold cost of street frontage lots × Street frontage lots

= $79,000 × 125

= $9,875,000

Total cost = Total cost of golf course lots + Total cost of street frontage lots

= $10,900,000 + $9,875,000

= $20,775,000

Total amount of purchase of utilities and land improvement = Total cost + Expenditure of street and utilities improvement

= $20,775,000 + $1,540,000

= $22,315,000

Joint cost allocated = Total cost of golf course lots ÷ Total cost × Total amount of purchase of utilities and land improvement

= $10,900,000 ÷ $20,775,000 × $22,315,000

= $11,707,990.4

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