Johnson Realty bought a 2,000-acre island for $10,000,000 and divided it into 200 equal size lots

Subject:AccountingPrice:5.87 Bought7

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Johnson Realty bought a 2,000-acre island for $10,000,000 and divided it into 200 equal size lots. As the lots are sold, they are cleared at an average cost of $5,000. Storm drains and driveways are installed at an average cost of $8,000 per site. Sales commissions are 10% of selling price. Administrative costs are $850,000 per year.The average selling price was $160,000 per lot during 2015 when 50 lots were sold.

During 2016, the company bought another 2,000-acre island and developed it e1actly the same way. Lot sales in 2016 totaled 300 with an average selling price of $160,000. All costs were the same as in 2015.

 

Required:

Prepare income statements for both years using both absorption and variable costing methods.