(55)

Contracts,

Dr.

$30,506.00

(56)

Purchase,

Dr.

38,840.00

(57)

Gains,

Cr.

25,470.00

(58)

Expense,

Dr.

4,229.04

(59)

Commissions (Section222),

Cr.

1,580.00

(60)

Town Lots (Section 223),

Dr.

10,560.00

This group of accounts shows the transactions relating to a subdivision owned by the concern. It consists of five separate purchases, each of which was originally carried in the same manner as the Dawes account (Section 197). Upon closing the books, these were consolidated and it was found that 693 acres had been bought at a total cost of $51,833.

These various purchases were surveyed, platted, and divided into 567 lots of about one acre each, the difference being accounted for by streets, parks, etc. A part of the tract was subdivided into 181 city lots 50 X 100 feet, known as "Ladore Townsite." The estimated cost of these lots was $2,250, which was deducted from the total cost, leaving the net cost of the one-acre lots at $49,583, or $87.45 a lot. In calculating profits, etc., this in round figures is called $90.

The balance of Expense account, $4,229.04, was found to cover cost of road-making and other permanent improvements. Further improvements were contemplated which, it was estimated, would cost $2,500, making a total sum of $6,729.04. As it was desired that the total cost of these expenses should be added to the purchase price of the land, the following journal entry was made:

Ladore Purchase............................

$6,729.04

To Ladore Expense.................

$6,729.04

This being posted to the Expense account, left a credit balance of $2,500 as a reserve for future expenditures.

These operations brought the cost up to $56,312.04, or $99.32 a lot, which is called $100 when calculating profits. An analysis of the sub-ledger shows that 185 lots were sold, yielding an average profit of $102 per lot. As the original amount of these sales was $37,370, the unearned profits are as follows: $30,506 / $37,370 X 185 X $102 = $15,404

This amount deducted from the gain of $25,470 leaves $10,066 to be carried to Profit and Loss.