A Company Owns an Office Building That It Rents Out

question 13

Essay

A company owns an office building that it rents out to other businesses. Due to a downturn in the economy, rental rates have dropped while vacancy rates have increased. Due to these circumstances, the company evaluated the building for impairment. The building has a cost of $70 million, accumulated depreciation of $47.05 million, and a value in use of $20 million. In addition, the company has recently received an offer to purchase the building for $22 million. Legal and other costs necessary to complete a sale of this type would amount to $200,000.
Required:
Determine the amount of impairment, if any.

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Definitions:

Logistics

The detailed organization and implementation of a complex operation, often referring to the movement, storage, and flow of goods, services, and information.

Distribution

The process of delivering products, goods, or services from the production point or supplier to the end consumer.

Price Adjustment Contract

A contractual agreement that allows for changes in the price based on certain conditions or indices, often used to account for inflation or cost increases.

Economic Changes

Adjustments or shifts in the conditions of an economy, affecting factors like prices, jobs, and wealth distribution.