Kingbird Realty Corporation purchased a tract of unimproved land for $51,000. Th
ID: 2599288 • Letter: K
Question
Kingbird Realty Corporation purchased a tract of unimproved land for $51,000. This land was improved and subdivided into building lots at an additional cost of $28,000. 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 Kingbird Realty Corporation instructs you to arrive at the net income realized on this operation to date.
Group
No. of Lots
Price per Lot
1 8 $4,500 2 16 6,000 3 17 3,600Explanation / Answer
Group No. of Lots Price per Lot Selling Price Cost allocated Cost per Lot 1 8 $4,500 $36,000 (36,000/193,200) x (51,000 + 28,000) = $14,720 $1,840 2 16 6,000 96,000 (96,000/193,200) x (51,000 + 28,000) = $39,255 $2,453 3 17 3,600 61,200 (61,200/193,200) x (51,000 + 28,000) = $25,025 $1,472 193,200 Group Lots sold Sales price total sales Cost per lot Total cost of goods 1 3 $4,500 $13,500 $1,840 $5,520 2 9 6,000 54,000 2,453 22,077 3 15 3,600 54,000 1,472 22,080 $121,500 $49,677 Calculation of Net Income Sales $121,500 Cost of goods sold $49,677 Gross profit $71,823 Expenses $18,000 Net Income $53,823
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.