These accounts relate to a subdivision owned by the concern, which was bought some years ago under a "Contract Payable." Analysis of the sub-ledger shows that there are 108 lots under sale and that the original amount of the contracts was $7,607. The estimated book value of each lot is $14. The average profit, therefore, was $56.43 a lot (say $56), and the gain unearned and to be left in would be:

1827 / 7607 X 108 X 56 = $1,452 or more than appears in the Gain on Sales account.

This led to a further investigation and it was found that there remained unsold 348 lots, which cost $5,378, or $15.45 a lot. This increased price was caused by certain improvements on the property, not considered when the gain on sales was entered.

As the lots are selling for $100 to $150 each, it is evident that a cost price of $15.45 is reasonable; and in order to correct the errors, a charge of $395.20 is made against Profit and Loss and credited to the Grandville Gains account, which is now correct.

Note that account No. 33 is in fact a real estate account, the property being owned by the concern, and could with propriety have been kept in the real estate ledger. The account was opened when the property was purchased, and is kept because all employees familiar with the books have been accustomed to regard this account as showing the value of the unsold part of Grandville. Similar remarks apply to No. 34, which, in fact, is a part of the general Gain on Sales account.