Communication: the Old Fix-It Is a Company Specialising in the Restoration

Essay

Communication: The Old Fix-It is a company specialising in the restoration of old homes. To showcase its work, the company purchased an old Victorian home in downtown Sandy Bay, Hobart. The original home was purchased for $125,000. A new heating and air-conditioning system was added for $30,000. The house was completely rewired and re-plumbed at a cost of $50,000. Custom cabinets were added, and the floors and trim were refurbished to their original condition, at a cost of $75,000. The project was such a success, that Old Fix-It decided to purchase another very large home, this time in Byron Bay, NSW. A Realtor offered to purchase the home in Sandy Bay for $175,000. He plans to lease it as luxury short-term apartments for visiting dignitaries. Old Fix-It decided that a modest return was all that was required, and so they agreed to sell. Only afterward did they learn that they had a $10,000 loss on the sale. The president of the company, Dale Eubanks, does not believe that a loss is possible. 'We sold that house for more than we paid for it', he said. 'I know we put some money in it, but we had depreciated it for three years. How in the world can we have a loss?'
Write a short memo to Mr Eubanks explaining how it would be possible to have a loss. Do not try to use specific numbers for cost or depreciation.