## Allocation of Joint Costs for Rental Units**Problem Statement:**A company purchases a 6,552-square-foot building for $375,000. The building has two separate rental units:- **Unit A:** - Size: 1,872 square feet - Rent: $2.50 per square foot - Features: Desirable location on the corner- **Unit B:** - Size: 4,680 square feet - Rent: $1.50 per square foot**Objective:**Determine how much of the joint cost should be allocated to Unit A and Unit B using the value basis of allocation.**Table for Analysis:**| | Rental Value | Percent of Rental Value | Joint Cost | Allocated Cost ||-------------|---------------------------|------------------------------|------------|----------------|| | Numerator | Denominator | % of Market Value | | || **Unit A** | | | | | || **Unit B** | | | | | || **Totals** | | | **0.00%** | | |### Explanation of the Table:**Rental Value:**1. **Numerator:** Total rental value for each unit, calculated by multiplying the unit's square footage by its rental rate.2. **Denominator:** Sum of rental values for all units.**Percent of Rental Value:**This is the percentage of the total rental value attributed to each unit.1. **% of Market Value:** Calculated using the formula: \[ \text{(Numerator / Denominator) * 100} \]**Joint Cost:**Given as $375,000 for the entire building.**Allocated Cost:**The cost to be allocated to each unit based on its percentage of the total rental value.**Steps to Solve the Problem:**1. **Calculate the Rental Values:** - Unit A: $1,872 \text{ sq ft} \times \$2.50/\text{sq ft} = \$4,680$ - Unit B: $4,680 \text{ sq ft} \times \$1.50/\text{sq ft} = \$7,020$2. **Sum the Rental Values:** - Total Rental Value = \( \$4

Space used in unit A1,872square feetRent per square foot$2.50Rental value for unit A (1,872 *…

A company purchases a 6,552-square-foot building for $375,000. The building has two separate rental units. Unit A, which has the desirable location on the corner and contains 1,872 square feet, will be rented for $2.50 per square foot. Unit B contains 4,680 square feet and will be rented for $1.50 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? Unit A Unit B Totals Rental value Percent of rental value Numerator Denominator % of Mkt Value 0.00% Joint Cost Allocated cost

A company purchases a 6,552-square-foot building for $375,000. The building has two separate rental units. Unit A, which has the desirable location on the corner and contains 1,872 square feet, will be rented for $2.50 per square foot. Unit B contains 4,680 square feet and will be rented for $1.50 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? Unit A Unit B Totals Rental value Percent of rental value Numerator Denominator % of Mkt Value 0.00% Joint Cost Allocated cost

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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