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rjkz [21]
3 years ago
15

Ratliff Development Corporation purchases a tract of land in 2018 at a cost of $120,000 and subdivides the land into 30 building

lots. The cost of subdividing is $6,000. In 2018, Ratliff installs roads and utilities at a cost of $36,000 and pays property taxes totaling $2,000 in 2018 and 2019. Interest paid on the loan used to purchase the land is $10,000 in 2018 and $6,000 in 2019. In 2019, Ratliff sells 10 lots for a total of $350,000. What is the corporation’s gain or loss on the sale of the lots?
Business
1 answer:
puteri [66]3 years ago
5 0

Answer:

$ 290,000

Explanation:

$ 120,000 Land cost

<u>Expenses</u>  

$   6,000 Subdividing

$ 36,000 Roads and Utilities

$ <u>  2,000</u> Taxes

$ 44,000 Total

<u>Interest</u>  

$ 10,000 2018

$ <u>6,000</u> 2019

$ 16.000 Total

<u>Cost of Each Lot</u>  

$ 120,000 Land cost

$  44,000 Total Expenses

$  <u> 16,000</u> Interest  *

$ 180,000 Total Cost

$     6,000      Each   ( $ 180,000 / 30 units ) *

<u>Quantity  sold:  30 </u>

$ 6,000 Cost per unit

<u>Sales</u>  

10 x $ 35,000    =   $ 350,000  

 

<u>Income Statement</u>  

Sales $ 350,000

Cost $<u>   (60,000) </u>  ( = $ 6,000 x 10 units ) *

Gain $ 290,000     *

<em>* Includes financing costs</em>

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