Question

BizTech bought a new building for its headquarters in the year 2015. The building cost 797,163 dollars and the company spent an additional 71,001 dollars renovating the space before it was put into service. The building has been in use since October 21st, 2015. BizTech forecasted that in 2040 the building would have a net salvage value of $1,000,000. Estimate the Remaining Book Value of the building in 2029 if BizTech decides to sell the building on February 15th 2029 for $1,135,859. (note: round your answer to two decimal places; do not include spaces or dollar signs; do not round the recovery factors from the depreciation tables and make sure to include plenty of digits in your calculations).

Answer 1

Calculating the Remaining Book Value of BizTech's building in 2029 requires additional information on the depreciation method and rate of appreciation. The company's forecast and sale price suggest the value of the building has appreciated. Without specific depreciation details, an appraisal would be needed to determine the accurate book value as of the sale date.

Step-by-step explanation:

To estimate the Remaining Book Value of BizTech's building in 2029, we need to consider the initial cost of the building, the cost of renovations, and the forecasted salvage value. The total cost basis of the building is the sum of the purchase price and the renovation costs, which is $797,163 + $71,001 = $868,164. The building is forecasted to have a net salvage value of $1,000,000 in 2040, which suggests that the company is using a depreciation method that anticipates the building increasing in value over time, rather than the typical Straight-Line or Declining Balance methods where the asset depreciates to its salvage value. As the company is planning to sell the building for $1,135,859 on February 15th, 2029, this suggests that the building's value has appreciated since acquisition.

The information provided is insufficient to calculate the exact Remaining Book Value without additional data on the depreciation method used and the rate of appreciation. Generally, the book value is calculated by taking the cost basis and subtracting accumulated depreciation. However, in this case, the value of the building has exceeded the original cost, implying appreciation rather than depreciation. A full appraisal as of the sale date would be necessary to accurately determine the book value.