Prepare income statements for both years

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Reference no: EM13502224

Johnson Realty bought a 2,000- hectare 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 2009 when 50 lots were sold. During 2010, the company bought another 2,000 - hectare island and developed it exactly the same way. Lot sales in 2010 totalled 300 with an average selling price of $160,000. All costs were the same as in 2009.

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

Reference no: EM13502224

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