Question

Exercise 9-9 Whispering Realty Corporation purchased a tract of unimproved land for $53,000. 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. Price per Lot No. of Lots Group $3,600 15 4,800 2 2,880 18 3 Operating expenses for the year allocated to this project total $15,000. Lots unsold at the year-end were as follows. 5 lots Group 1 7 lots Group 2 Group 3 2 lots At the end of the fiscal year Whispering 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.) Net income $

Answer 1

Particulars	Amount
Purchase price of unimproved land	$53,000
Additional cost	$29,000
Total cost of 45 lots purchased	= 53,000 + 29,000 = $82,000
Cost of each lot	= 82,000 / 42 = $1952.38
Revenue from Lots sold
Group1	= 9 * 3,600 = $32400
Group2	= 15 * 4,800 = $72000
Group3	= 18 * 2,880 = $51840
Revenue from sales	= $156240
Cost of 19 lots sold	= 28 * $1952.38 = $54666.64
Operating expenses	$15,000
Net income	= $86573.36