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11 December, 00:40

Sheffield Realty Corporation purchased a tract of unimproved land for $115,500. This land was improved and subdivided into building lots at an additional cost of $72,366. These building lots were all of the same sizes but owing to differences in location were offered for sale at different prices as follow:

Group

No. of Lots

Price per Lot

1 8 $4,500

2 16 6,000

3 17 3,600

Operating expenses for the year allocated to this project total $18,000. 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, Kingbird Realty Corporation instructs you to arrive at the net income realized on this operation to date.

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  1. 11 December, 00:51
    0
    Sheffield Realty Corporation

    Sales Revenue : Group 1 (3 * $4,500) $13,500

    Group 2 (9*6,000) 54,000

    Group 3 (15*3,600) 54,000

    283,500

    Cost of Lot sold (123,697)

    Gross Profit 159,803

    Operating Expenses (18,000)

    Net Income 141,803

    Workings

    1. Total cost of building = cost of land + additional cost

    = $115,500 + $72,336

    = $187,836

    2. Total Number of lots available for sales = 8 + 16 + 17 = 41

    3. Number of lot sold = (8-5) + (16 - 7) + (17-2) = 27

    4. cost per Lot = $187,836 / 41 = $4,581.37

    5. cost of lot sold = $4,581.37 * 27 = $123,696.88

    $123,697
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