The corporation purchased a tract of unimproved land for
$148,500. This land was improved and subdivided into building lots
at an additional cost of $93,042. These building lots were all of
the same size but owing to differences in location were offered for
sale at different prices as follows.
Group |
No. of Lots |
Price per Lot |
||||
1 | 9 | $8,100 | ||||
2 | 15 | 10,800 | ||||
3 | 17 | 6,480 |
Operating expenses for the year allocated to this project total
$49,140. Lots unsold at the year-end were as follows.
Group 1 | 5 lots | |
Group 2 | 7 lots | |
Group 3 | 2 lots |
At the end of the fiscal year the corporation instructs you to
arrive at the net income realized on this operation to date.
Net income |
$ |
Solution: | |||
Cost of Land | $ 148,500 | ||
Add: Additional cost | $ 93,042 | ||
Add: Operating expenses | $ 49,140 | ||
Total cost | $ 290,682 | ||
Total number of lots - 9 + 15 + 17 | 41 | ||
Cost per lot | $ 7,089.80 | ||
Group 1 | Group 2 | Group 3 | |
Sale revenue | $ 32,400 | $ 86,400 | $ 97,200 |
Less: Cost | $ 28,359 | $ 56,718 | $ 106,347 |
Net income | $ 4,041 | $ 29,682 | -$ 9,147 |
Total income | 24,575 |
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