Sertoma Condos Inc. a small company owned by Adam Garner, leases three condos of

Question

Sertoma Condos Inc. a small company owned by Adam Garner, leases three condos of differing sizes to customers as vacation facilities. Labor costs for each condo consist of maid service and maintenance cost. Other direct operating costs consist of interest and depreciation. The direct operating costs for each condo follow.

                            Direct labor            Other Direct
                                                         Operating costs
Condo 1                    $ 7,200                  $18,000
Condo 2                       9,300                    21,000
Condo 3                      11,250                   28,500
Total                         $27,750                  $67,500

Indirect operating expenses, which amounted to $20,250, are allocated to the condos in proportion to the amount of other direct operating costs incurred for each.

a. Assuming that the amount of rent revenue from Condo 2 is $48,000, what amount of income did it earn?
b. Based on the preceding information, will the company show finished goods inventory on its balance sheet? If so, what is the amount of this inventory? If not, explain why not.

Explanation / Answer

Condo 2 a.. rent revenue                                                      $48,000 Less: Direct labor                                $9300 other direct operating costs          $21000 indirect operating expenses           $6300 Total expenses                                                      $36900 Net income                                                         $11100 b.There is no finished good inventory. b.There is no finished good inventory.

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.