Question

A company purchases a 8,800-square-foot commercial building for $375,000 and spends an additional $58,000 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 1,800 square feet, will be rented for $1.50 per square foot. Unit B contains 7,000 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 Percent of Market Value Joint Cost Apportioned Cost Numerator Denominator % of Mkt Value Unit A Unit B Totals

Answer 1

Answer: calculation of Total Joint cost :- commercial buildings = $375,000 Rent Jooo Total Joint cost $425,000 Unit A market value (1,800Ⓡ$1.50 ) = $2,700 Unit B market value (1000x$0.90) = $ 6,300 Market percent of a value Market value le of Market value 1 Numera Denomina Ma Jointcost Appostioned laskof value cost UNIT-A $2,700 $2,700 $9,000 2700/9000 = 30% $433,000 $129900 UNIT-B $6,300 6,300 $9,000 6300/9000= 70% $493,000 $303/00 $9.000 100% $433000 .: The cost assigned to unit 8 = $303.100