Answered: l estate values are appreciating. Write…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Assume that you are the accountant for Computer Consultants. Prior to this year, Computer Consultants operated out of a leased office. However, the company purchased its own office building this year. The building is in an area where real estate values have been increasing an average of 6 percent per year.

The owner of Computer Consultants has asked why you recorded depreciation on the building if real estate values are appreciating. Write a response to the owner explaining why depreciation must be recorded on the company’s accounting records.

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