Phil Collins Realty Corporation purchased a tract of unimproved land for $54,000
ID: 2455986 • Letter: P
Question
Phil Collins Realty Corporation purchased a tract of unimproved land for $54,000. This land was improved and subdivided into building lots at an additional cost of $29,000. 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 $16,900. 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. (Round ratios for computational purposes to 4 decimal places, e.g. 78.7234% and final answer to 0 decimal places, e.g. 5,845.)
Group
No. of Lots
Price per Lot
1 8 $3,150 2 15 4,200 3 20 2,100Explanation / Answer
Solution on the basis of Relative sales value method Total cost calculation Particular Amount in $ purchased cost of unimproved land 54000 Improvement and allocation cost 29000 Total cost 83000 Group No of lots Price per lot Selling price ( No of plot* Price per lot) Cost allocated (Total cost * ( selling price/ total selling price) cost per plot( Cost allocated /No of plot) 1 8 3150 25200 16064.5161 2008.064516 2 15 4200 63000 40161.2903 2677.419355 3 20 2100 42000 26774.1935 1338.709677 130200 83000.0000 6024.1935 Group Lot sold Price per lot Total sales Cost per plot Total cost of goods 1 4 3150 12600 2008.0645 8032.258065 2 9 4200 37800 2677.4194 24096.77419 3 18 2100 37800 1338.7097 24096.77419 88200 56225.80645 Calculation of Net Income Particulars Amount in $ Sales 88200.0000 Less- Cost of goods sold 56225.8065 Gross Profit 31974.1935 Less- Expenses 16900.0000 Net Income 15074.1935 Net Income ratio 17.09%