These accounts relate to a tract handled under a selling agreement of type No. 3 (Section 178), covering 5,000 acres, which has been divided into ten-acre lots. The concern is to pay all the expense of advertising, etc., and remit to the owner 50% of all collections until he has received $15 an acre, when he will convey title to the concern.
This is a recent contract and the work done to date has been for the most part surveying and developing the land. At the present time, 8 lots have been sold for $2,400, of which $485 has been collected. No payments have yet been made to the owner, and the Purchase account therefore stands credited with 80 acres at $15 an acre. Attention may be called to the fact that under this agreement the concern loses nothing through reduced acreage on account of streets and roads, inasmuch as the owner is paid only for the number of acres covered by the deeds he grants.
The whole transaction being so new, all the balances of the Fairmount Contracts were carried forward into the balance sheet, the expenses being carried in the "Real Estate" column, as this money represents physical improvements from which there is a reasonable prospect that the concern will obtain a profit.