Sertoma Condos Inc. a small company owned by Adam Garner, leases three condos of differing sizes to customers as vacation facilities. Labor costs for each condo consist of maid service and maintenance cost. Other direct operating costs consist of interest and depreciation. The direct operating costs for each condo follow.
Direct labor Other Direct
Operating costs
Condo 1 $ 7,200 $18,000
Condo 2 9,300 21,000
Condo 3 11,250 28,500
Total $27,750 $67,500
Indirect operating expenses, which amounted to $20,250, are allocated to the condos in proportion to the amount of other direct operating costs incurred for each.
a. Assuming that the amount of rent revenue from Condo 2 is $48,000, what amount of income did it earn?
b. Based on the preceding information, will the company show finished goods inventory on its balance sheet? If so, what is the amount of this inventory? If not, explain why not.