Phil Collins Realty Corporation purchased a tract of unimproved land for $52,000
ID: 2477782 • 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 $30,000. 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 $15,500. 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%. Round cost per lot and final answer to 0 decimal places, e.g. 5,845.)
Group
No. of Lots
Price per Lot
1 9 $4,950 2 17 6,600 3 21 3,300Explanation / Answer
Step 1: Calculate the Cost Per Lot
The cost per lot has been computed with the use of following table:
________
Step 2: Calculate the Total Sales Value and Cost of Lots Sold
The total sales value and cost of lots sold is calculated below:
________
Step 3: Calculate Net Income
The net income has been calculated with the use of following table:
Group No. of Lots (A) Price Per Lot (B) Selling Price (A*B) Relative Sales Price (C) Total Cost [52,000 + 30,000] (D) Cost Allocated (C*D) Cost Per Lot (C*D/A) 1 9 4,950 44,550 19.7080% (44,550/226,050) 82,000 16,161 1,796 2 17 6,600 112,200 49.6350% (112,200/226,050) 82,000 40,701 2,394 3 21 3,300 69,300 30.6569% (69,300/226,050) 82,000 25,139 1,197 Total $226,050 100.0000% 82,000 82,000