Pina Realty Corporation purchased a tract of unimproved land for $54,000. This l
ID: 2579503 • Letter: P
Question
Pina 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 $18,000. Lots unsold at the year-end were as follows.
At the end of the fiscal year Pina 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 9 $3,300 2 17 4,400 3 19 2,640Explanation / Answer
Calculation of cost per Lot Cost of unimproved land $54,000 Cost of land improvement $29,000 Operating expenses allocated $18,000 Total Cost incurred $101,000 / Total no.of lots (9+17+19) 45 Cost per Lot $2,244.44 Calculation of Net Income Group 1 Group 2 Group 3 Total Sales - 4 Lots * $3300 $13,200.00 - 10 Lots * $4400 $44,000.00 - 17 Lots * $2640 $44,880.00 Less : Cost of goods sold - 4 Lots * $2244.44 $8,977.78 - 10 Lots * $2244.44 $22,444.44 - 17 Lots * $2244.44 $38,155.56 Net Income $4,222.22 $21,555.56 $6,724.44 $32,502 Net Income $32,502