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

Answer:

                       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

Explanation: