HOW MUCH IS THAT BUILDING REALLY WORTH? Viron, Inc., was created in 2006 to recycle plastic products and manufacture a variety of new items. The actual production process was quite complex because the old plastic had to be divided into categories and then reclaimed based on the composition. Viron made new products based on the type of plastic available and the market demand. In December 2010, the company spent $7.1 million to construct a building for manu- facturing purposes. It was designed specifically to meet Virons needs. The building was constructed near Gaffney, South Carolina, to take advantage of a large labor force avail- able because of high unemployment in the area. Unfortunately, because of the lingering recession, Viron was not able to generate rev- enues quickly enough to reach a break-even point and was forced to file for bankruptcy. An accountant was hired to produce a statement of financial affairs to aid the parties in deciding whether to liquidate or reorganize. In producing the statement of financial affairs, the accountant needed to establish a liquidation value for the building in Gaffney that was the companys largest asset. A real estate appraiser was brought in and made the following comments about the structure. The building is well constructed and practically new. It is clearly worth in excess of $7 million. However, I doubt that anyone is going to pay that much for it. We dont get a lot of new industry in this area, so not many companies need to buy large buildings. Even if a company did buy the building, it would have to spend a sig- nificant amount of money for conversion. Unless a company just wanted to recycle plastics, the building will have to be completely adapted to any other purpose. To tell you the truth, I am not sure it can be sold at any price. There are a lot of abandoned buildings in this area of South Carolina. Of course, if someone wants to recycle plastics, it just might bring in $7 million. In producing the statement of financial affairs, how should the accountant report this building?

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