Question

1. Doran Realty Company purchased a plot of ground for $1,900,000 and spent $4,100,000 in developing it for building lots. The lots were classified into Highland, Midland, and Lowland grades, to sell at $120,000 $90,000, and $60,000 each, respectively. (5points) Instructions Complete the table below to allocate the cost of the lots using a relative sales value method. No. of Selling Total % of Apportioned Cost Grade Lots Price Revenue Revenue Total Per Lot Highland 20 Midland 40 Lowland 100 A A 760

Answer 1

Grade Highland Midland Lowland No of Lots Selling price [A] [B] 20 $ 120,000 40 $ 90,000 100 $ 60,000 160 Total Revenue [C=AB] $ 2,400,000 3,600,000 6,000,000 $ 12,000,000 % of Revenue Total [D] [E] 20% $ 30% 50% Apportioned cost Per Lot (E/A] 1,200,000 $ 1,800,000 $ 3,000,000 $ 6,000,000 60,000 45,000 30,000 Working Notes: Calculation of % Revenue Highland (2,400,000 / 12,000,000) Midland (3,600,000 / 12,000,000) Lowland (6,000,000 / 12,000,000) 20% 30% 50% $ Total Cost Purchase price Development cost Total Cost 1,900,000 4,100,000 6,000,000 $ Apportioned of Cost Highland Midland Lowland (6,000,000 x 20%) (6,000,000 x 30%) (6,000,000 x 50%) 1,200,000 1,800,000 3,000,000