(d) is the average profit per lot, obtained by reducing the following formula:

Original amount of open contracts / Number of open contracts cost per lot

Earned profits

Earned Profits under Example "X"

At close of first period:

Balance of Gain Account (2,000 X $24).......................

Cr.

$48,000.00

(a)

Balance of Contracts (2,000 X $36) - $24,000 = ..................................................

$48,000

(b)

Original amount (2,000 X $36).........................

$72,000

(c)

Number of lots in open contracts = ................

2,000

(d)

Average profit per lot =.................................

$24

Earned Profit =

$48,000 -

$48000 / $72,000 X 2000 X $24 =

Dr.

16,000.00

At close of second period:

Balance forward of Gain Account......................................

Cr.

$32,000.00

Add gain on 1,250 lots at $24.......................................

Cr.

30,000.00

Cr.

$62,000.00

(a)

$48,000 + (1,250 X $36) - $30,000 =......

. $63,000

(b)

$72,000 + (1,250 x $36) =...............

$117,000

(c)

2,000 + 1,250 =........................

3,250

(d)

$24

Earned Profit =

$62,000 -

$63,000 X $117,000 X 3,250 X $24=

Dr.

20,000.00

At close of third period:

Balance forward of Gain Account.............................

Cr.

$42,000.00

Add gain on 1,250 lots at $24...................................

Cr.

30,000.00

Cr.

$72,000.00

(a)

$63,000 + (1,250 x $36) - $36,000 = .....

$72,000

(b)

$117,000 + (1,250 x $36) =..............

$162,000

(c)

3,250 + 1,250 =................................

4.500

(d)

$24

Earned Profit =

$72,000 -

$72,000 / $162,000 X 4,500 X $ 24 =

Dr.

24,000.00

At close of fourth period:

Balance forward of Gain Account

Cr.

$48,000.00

Add gain on 500 lots at $24

Cr.

12,000.00

Cr.

$60,000.00

(a)

$72,000 + (500 X $36)

(b)

$162,000 + (500 X $36) - (2,500X$36)* =

$90,000

(c)

4,500 + 500 - 2,500 =

2,500

(d)

$24

*Lots deeded.

Earned Profit =

$60,000 -

$48,000 / $90,000 X 2,500 X $24 =

Dr.

28,000.00

Cr.

$32,000.00

At close of fifth period:

The earned profits must be:

48,000 / 180,000 of $120,000 (total profits), which is $32,000.

Earned Profits under Example "Y"

At close of first period:

Cr.

$48,000.00

(a)

Balance of Contracts (2,000 X $36) - $24,000 -

$48,000

(b)

Original amount of open contracts (2,000 X $36) - (650 x $36) - ................

$48,600

(c)

Number of lots on open contracts, 2,000 - 650 =...............................

1,350

(d)

Average profit per lot = ..............................

$24

Earned Profit =

$48,000 -

$ 48,000 / $ 48,600 X 1,350 X $24 =

Dr.

16,000.00

At close of second period:

Balance forward of Gain Account...................................

Cr.

$32,000.00

Add gain on 1,250 lots at $24.........................................

Cr.

30,000.00

Cr.

$62,000.00

(a)

$48,000 + (1,250X$36) -$30,000=......

$63,000

(b)

$48,600 + (1,250 x $36) - (800 x $36) =

$64,800

(c)

1,350 + 1,250 - 800 = ............................

1,800

(d)

$24

Earned Profit =

$62,000 -

$63,000 X $64,800 X 1,800 X $24 =

Dr.

20,000.00

At close of third period:

Balance forward of Gain Account.........................

Cr.

$42,000.00

Add gains 1,250 lots at $24............................................

Cr.

30,000.00

Cr.

$72,000.00

(a)

$63,000 + (1,250 x $36) - $36,000 =.....

$72,000

(b)

$64,800 + (1,250 X $36) - (1,000 x $36) =

$73,800

(c)

1,800 + 1,250 - 1,000 = ............................

2,050

(d)

$24

Earned Profit =

$72,000 -

$72,000 / $73,800 x 2,050 x $ 24 =

Dr.

24,000.00

At close of fourth period:

Balance forward of Gain Account................................

Cr.

$48,000.00

Add gains 500 lots at $24....................................................

Cr.

12,000.00

Cr.

$60,000.00

(a)

$72,000 + (500 X $36) - $42,000 as.......

$48,000

(b)

$73,800 + (500 x $36) - (1,200 x $36) =......

$48,600

(c)

2,050 + 500 - 1,200 = ..............................

1,350

(d)

$24

Earned Profit =

$60,000 -

$48,000 / $48,600 x1,350 x $24 =

Dr.

28,000 00

Cr.

$32,00000

At close of fifth period: As in "X" = $32,000

By contrasting extreme results in the matter of advance payments and payments in arrears, these two examples afford an additional proof of the statement that earned profits in any given case depend solely upon, and are proportioned to, the cash actually paid in, together with other credits, regardless of arrears or of advance payments.