disposal of acreage HELP
taskey
Registered Posts: 1,800
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!!!
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!!!
0
Comments

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!0 
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
Tracy0 
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)0
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