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A company purchases a 8,580-square-foot building for $340,000. The building has two separate rental units. Unit A, which has the desirable location on the
A company purchases a 8,580-square-foot building for $340,000. The building has two separate rental units. Unit A, which has the desirable location on the corner and contains 1,755 square feet, will be rented for $2.00 per square foot. Unit B contains 6,825 square feet and will be rented for $1.20 per square foot. How much of the joint cost should be allocated to Unit A and to Unit B using the value basis of allocation? Answer is complete but not entirely correct. Rental value Percent of rental value Joint Cost Allocated cost Numerator Denominator % of Mkt Value Unit A $ 1,755 $ 1,755 $ 8,580 20.00% X $ 10,200 = $ 238,000 Unit 6,825 x 6,825 x 8,580 x 80.00% XX $ 10,200 = -227,800 B Totals $ 8,580 100.00% $ 10,200
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