A dwelling is 30 years old but has been fully renovated and presents as though it were 10 years old. Total economic life is 55 years and cost new is $340,000. What is the accrued depreciation?
Correct Answer
A) $61,818
Why this is correct: renovation resets effective age, which is the figure the age-life method uses. Calculation: 10 / 55 x $340,000 = $61,818. Why the other choices are wrong: $185,455 uses the 30-year actual age and charges the property for a renovation it received; $30,909 uses five years; $113,333 divides cost new by three, which follows from nothing in the stem.
Why This Is the Correct Answer
Why this is correct: renovation resets effective age, which is the figure the age-life method uses. Calculation: 10 / 55 x $340,000 = $61,818. Why the other choices are wrong: $185,455 uses the 30-year actual age and charges the property for a renovation it received; $30,909 uses five years; $113,333 divides cost new by three, which follows from nothing in the stem.
More Cost Approach Questions
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