You as the New Facility Manager for Exercise-for-Health
Assume you have been hired as manager of the new Golden Health Spas facility that was recently purchased by Exercise-for-Health. One of your responsibilities as manager is to show that the facility is profitable. In fact, your contract specifies a bonus if the profits are at least 10 percent above the budgeted amount each year. In a recent conversation with the appraiser, it becomes clear to you that some of the item classified as land in the appraisal were really building improvements. No one at Exercise-for-Health is aware of this misclassification. As a result, the appraised value for the building asset account should be $350,000 instead of $300,000. When budgeted profits for the Golden Health Spas facility are computed each year, a charge for depreciation on the building is deducted from the profits. What impact does the improper appraisal have on your ability to achieve the bonus? What should you do?
(See our comment on the Online Learning Center Web site.)