disposal of acreage HELP

taskey

really confoosed now lol

june 98, p bought 50 acres for £300,000
feb 03, p sold 20 acres for £180,000

remaining 30 were valued @ £250,000

Mar 09, p sold remaining 30 for £350,000

Answer given

February 2003 disposal:
cost of 20 acres = 300,000 x 180,000 / 180,000 + 250,000 = £125,581

Remaining cost for the 30 acres = £174,419

now

WHAT<HOW< WHY< WHERE?????

surely 300,000 x 180,000 / 180,000 is 300,000??????

please someone tell me where i am going wrong as this just seems silly!!!

Lou1234

The formula is Original cost x A/(A+B)

with A being proceeds and B being market value of remaining land.

So forumla is 300,000 x 180,000/(180,000 + 250,000)

300,000 x 180,000/430000 = 125581

Think from your post you are adding the 250,000 to the answer instead of including it in brackets as above.

My first post answering so hope the above makes some sort of sense!

taskey

clear as mud now, thanks

in the answers from the AAT there are no brackets - as in my post. it would have made so much more sense if the brackets were included, as i can work it out from there.

thanks

Tracy

PGM

Current value of land is

20 acre £180
30 acre £250
total £430


So to work out the purchase cost of the amount sold you use that proportion, to split up the 300;

original cost 300 x (180/430) = 125,581



and purchase cost of remaining;

300 x (250/430)