In the case of subdivision sales, the same principles apply, but the data is secured in a different manner.

Take for example a lot in Eureka Gardens subdivision sold for $240, yielding a profit of $120. Assume that $30 was paid in cash, of which $15 was carried to Profit at the last closing of the books. It is now desired to cancel this contract, and the journal entry will consist of four items, viz.:

Eureka Gardens Purchase.........................

$120

Eureka Gardens Gains............................

105

To Eureka Gardens Contracts.....................

$210

" Cancellation Profits.........................

15

In explanation of this entry, it may be said that the cost of a Eureka Gardens lot and the balance of the contract are fixed amounts, viz., $120 and $210 respectively. The subdivision ledger shows that $15 has been carried to Profit and Loss account, leaving $15 for Cancellation Profits. The total of the fixed credit entries is therefore $225, and the remaining debit entry must therefore be $105.

The same result may be approximately arrived at by ascertaining the ratio between the collections and the selling price at the time the books were last closed, and assuming that the corresponding percentage of total credits up to

Cancellations of time sales the end of the last fiscal period has already been carried into Profit and Loss. If this amount is deducted from the same percentage of the total cash received, the difference will be the amount now to be carried to Cancellation Profits.

It is, of course, evident that, if we were to carry to Cancellation Profits the entire amount paid in, we should be carrying far too much and be anticipating profits, as would appear from the final payments when the whole subdivision was sold out and paid for.