Phil Collins Realty Corporation purchased a tract of unimproved land for $52,000
ID: 2453392 • Letter: P
Question
Phil Collins Realty Corporation purchased a tract of unimproved land for $52,000. This land was improved and subdivided into building lots at an additional cost of $28,000. 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
Operating expenses for the year allocated to this project total $15,400. Lots unsold at the year-end were as follows.
At the end of the fiscal year Phil Collins Realty Corporation instructs you to arrive at the net income realized on this operation to date.
Group
No. of Lots
Price per Lot
1 8 $4,650 2 16 6,200 3 20 3,100Explanation / Answer
CALCULATION OF NET INCOME OF PHIL COLLINS REALTY CORPORATION ON THIS OPERATION TO DATE:
SALES VALUE OF ALL THE LOTS OFFERED FOR SALES=8LOTS*$4,650+16LOTS*$6,200+20LOTS*$3,100
=$1,98,400
OPERATING COST ALLOCATED TO THE PROJECT=$15,400
OPERATING COST PER RUPEE OF SALES VALUE OF LOTS OFFERED FOR SALE=$15,400/$1,98,400=0.0776
COST OF UNIMPROVED LAND=$52,000
ADDITIONAL COST OF IMPROVEMENT=$28,000
COST OF UNIMPROVED LAND AND ADDITIONAL COST OF IMPROVEMENT PER RUPEE OF SALES VALUE OF LOTS OFFERED FOR SALE=($52,000+$28,000)/$1,98,400=$0.4032
SALES=(8-5)LOTS*$4,650+(16-8)LOTS*$6,200+(20-3)LOTS*$3,100
=$13,950+$49,600+$52,700
=$1,16,250
OPERATING COST ALLOCATED TO LOTS SOLD=$1,16,250*0.0776=$9,021
COST OF UNIMPROVED LAND AND ADDITIONAL COST OF IMPROVEMENT ALLOCATED TO LOTS SOLD=$1,16,250*0.4032=$46,872
NET INCOME REALISED ON THIS OPERATION TO DATE=$1,16,250-$9,021-$46,872=$60,357