Bergen Bakery hires you to close the books for their first year of business. At the...

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Bergen Bakery hires you to close the books for their first year of business. At the beginning of the year, they purchased the building for their bakery for $500,000. You estimate the useful life of the building to be 100 years after which it will be torn down, so you post an entry for $5,000 of depreciation for the year. You tell the owner the building now has a net book value of $495,000. The owner tells you that real estate has gone up in value this year and she thinks it is now worth $600,000. She asks you to adjust your numbers. In plain English, how do you respond to the owner? Bergen Bakery hires you to close the books for their first year of business. At the beginning of the year, they purchased the building for their bakery for $500,000. You estimate the useful life of the building to be 100 years after which it will be torn down, so you post an entry for $5,000 of depreciation for the year. You tell the owner the building now has a net book value of $495,000. The owner tells you that real estate has gone up in value this year and she thinks it is now worth $600,000. She asks you to adjust your numbers. In plain English, how do you respond to the owner?

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