(Relative Sales Value Method) Phil Collins Realty Corporation purchased a tract of unimproved land for $55,000.  This land was improved and subdivided into building lots at an additional cost of $34,460.00.  These building lots were all the same size but owing to differences in location were offered for sale at different prices as follows:Group                               # of lots                 Price per lot1                                        9                             $3,0002                                        15                           $4,0003                                        17                            $2,400Operating expenses for the year alloted to this project total $18,200.  Lots unsold at the year-end were as follows:Group 1  5 lotsGroup 2  7 lotsGroup 3  2 lotsInstructions- at the end of the fiscal year Phil Collins Realty Corporation instructs you to arrive at the net income realized on this operation to date.

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Asked Nov 17, 2019
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(Relative Sales Value Method) Phil Collins Realty Corporation purchased a tract of unimproved land for $55,000.  This land was improved and subdivided into building lots at an additional cost of $34,460.00.  These building lots were all the same size but owing to differences in location were offered for sale at different prices as follows:

Group                               # of lots                 Price per lot

1                                        9                             $3,000

2                                        15                           $4,000

3                                        17                            $2,400

Operating expenses for the year alloted to this project total $18,200.  Lots unsold at the year-end were as follows:

Group 1  5 lots

Group 2  7 lots

Group 3  2 lots

Instructions- at the end of the fiscal year Phil Collins Realty Corporation instructs you to arrive at the net income realized on this operation to date.

 

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Expert Answer

Step 1

Compute the total cost per lot.

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Group Number of lots Sales Price (S) Total Sales Price ($) Sales Price Percentage Total Cost (S) (4) Cost Allocated (S) Per lot Cost (S) 1 3 Total 17 15 41 3,000 27,000 21% (1) 89,460 4,000X 60,000 47% (2) 89,460 42,000 2,800 9.400 2,400 X 40,800 127,800 32% (3) 100% 89,460 28,560 89,460| 1,680 18,900 6,580 2,100

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Step 2
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Working Notes: (1) Compute the sales percentage of Group 1 Sales Price Sales Percentage= x100 Total Sales Price $27,000 x100 $127,800 21% (2) Compute the sales percentage of Group 2 Sales Price Sales Percentage -x100 Total Sales Price S60,000 x100 $127,800 47% (3) Compute the sales percentage of Group 3 Sales Price Sales Percentage . x100 Total Sales Price S40,800 x100 $127,800 =32% (4) Compute the amount of total cost. Total Cost Purchasing cost Improvement Cost $55,000+S34, 460 =S89.460

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Step 3

Compute the cost associated with ...

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Sold Lots Total Number of Lot 4 15 27 Price per Lot (S) Total Selling Price (S) Cost per Lot (S) Extended Cost ($) Gross Profit 2,400 36,000 80,000 9,400 3,000 4,000 12,000 32,000 2,100 8,400 (5 3,600 (8) 2,800 6,580 1,680 22,400 (6) 25200 (7)56,000 9,600 (9) 10,800 (10)

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