Question

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.

Answer 1

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

Step-by-step explanation: