Johnson Realty Bought a 2,000-Acre Island for $10,000,000 and Divided

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 20X5 when 50 lots were sold.
During 20X6,the company bought another 2,000-acre island and developed it exactly the same way.Lot sales in 20X6 totaled 300 with an average selling price of $160,000.All costs were the same as in 20X5.
Required:
Prepare income statements for both years using both absorption and variable costing methods.

Correct Answer:

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